Post-quota, Textile Inc shoots from the wallet

To get a sense of the magnitude of the jump, look at the figures for the August-to-October 2004 and November-to-December quarters. New investments in the October 2004 quarter stood at only Rs 297 crore, while that in January 2005 quarter was Rs 661 crore.

The data further shows that investments in the textile sector grew by 63.74 per cent in the month of January 2005 as compared to January 2004. In January 2005, investments in the sector stood at Rs 5,127 crore as compared to Rs 3,131 crore in January 2004.

Experts are of the view that the reduced margins in the form of lower price is not going to impact the bottomline of the firms, who have to now make up through additional orders and more volumes.

D.K. Nair, Secretary General of the Indian Cotton Mills’ Federation (ICMF) explains that, ‘‘While prices are going down, firms are getting more orders in the post-quota regime. The bulk of the additional order is from the US while the EU market is yet to pick up.’’

Gautam Nair of Matrix Clothing adds that the thrust remains on the US, but the EU will pick up six to seven months down the line.

A look at the domestic prices of the both products and yarn also show that in keeping with the international trend, prices have come down. According to data compile by the Centre for Monitoring Indian Economy , prices of the two varieties of cotton products fell by 31.5 per cent and 10.9 per cent in January 2005, and further fell by 31.7 per cent and 10.9 per cent again in February 2005.

The trend is similar for yarn where prices of three varieties of cotton yarn fell in the range of 10.2 per cent to 20 per cent in the first two months of the post quota regime.