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April 07, 2005

Moment of truth for the Indian textiles industry

McKinsey Quarterly has an article on the opportunites thrown up for the industry by the removal of world trade quota restrictions.
India's apparel industry faces a moment of truth when world trade quota restrictions are fully removed, in January 2005. Exports could increase by more than 15 percent, making India the big winner after China—but only if the Indian government accelerates economic reforms and local manufacturers become more competitive...

With full-blown reforms, we estimate that Indian exports could increase by 15 to 18 percent annually—much higher than the historical growth rate of 6 percent. This expansion would enable India to win 5 percent of the global apparel-exports market by 2008 and to capture $25 billion to $30 billion by 2013. With only minor reforms, we expect annual growth of 8 percent at best.

Private equity firms, who have made significant investments in companies like Welspun India and Sintex Industries, will be watching the government's moves quite keenly as well.

Arun Natarajan is the Editor of TSJ Media, which tracks venture capital activity in India and Indian-founded companies worldwide. View sample issues of TSJ Media's Venture Intelligence India newsletters and reports.