Download Make in India and Productivity of Indian Textiles Industry

IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Make in India and Productivity of Indian Textiles
Industry: A Case Study Bombay Dyeing & Mfg. Co. Ltd
Dr. Asiya Chaudhary
Associate Professor
Department of Commerce
Aligarh Muslim University
Aligarh, India
Mohammed Pervej & Neshat Anjum
Research Scholars
Department of Commerce
Aligarh Muslim University
Aligarh, India
measure its productivity in the recent
Abstract
The Indian Textiles Industry plays a
past so as to understand how it can be
pivotal role in Indian economy through
further be exploited in context of ‘Make
its contribution to industrial output,
in India’ campaign, which may promote
employment
export
production and job creation in the sector.
earnings. Currently, it contributes about
Productivity in any industry measures
14% to industrial production, 4% to the
the level of production as well as
GDP, and 27% to the country’s export
employment.
earnings. It provides direct employment
proposed to find the productivity of
to over 45 million people. The Textiles
textiles industry by taking a sample
sector is the second largest provider of
study
employment
and
manufacturing Company Ltd., so as to
therefore cannot be ignored, forcing the
find out how the industry is contributing
Government to include the Industry
and can further be improved in order to
amongst the 25 key sectors, which have
fulfill the objectives of the ‘Make in
the potential to compete with the best in
India’ mission of the Government.
the world, for ‘Make in India’ mission.
Researcher has opted Bombay Dyeing
As this industry has always been
because it is one of the largest producer
contributing
of
generation,
after
and
agriculture
extensively
to
GDP,
of
textiles
So
the
Bombay
in
India.
researchers
Dyeing
&
Productivity
employment generation, total industrial
Accounting Model introduced by H. S.
production, etc., it becomes necessary to
Davis has been used in the paper to
144
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
measure the productivity of the sample
and in turn the manufacturing and
selected. The results depict that the
employment
productivity performance of industry has
industry
level
in
the
Textiles
not been very satisfactory due to several
reasons discussed in the paper. Finally
Keywords: Textiles industry, Bombay
the
Dyeing & Mfg. Co. Ltd., Productivity
paper
also
discusses
various
measures that can be adopted by the
accounting model.
government to enhance the productivity
Introduction:
India is the second largest producer of textiles and garments in the world. The Indian
textiles and apparel industry is expected to grow to a size of US$ 223 billion by 2021,
according to a report by Technopak Advisors. This industry accounts for almost 24% of
the world’s spindle capacity and 8% of global rotor capacity. Abundant availability of
raw materials such as cotton, wool, silk and jute as well as skilled workforce have made
the country a sourcing hub. The textiles industry has made a major contribution to the
national economy in terms of direct and indirect employment generation and net foreign
exchange earnings. The sector contributes about 14 per cent to industrial production, 4
per cent to the gross domestic product (GDP), and 27 per cent to the country's foreign
exchange inflows. It provides direct employment to over 45 million people. The textiles
sector is the second largest provider of employment after agriculture. Thus, growth and
all round development of this industry has a direct bearing on the improvement of the
India’s economy. (India brand Equity Foundation, 2016).Realizing the importance of the
industry, it has been allowed for a 100% FDI for its further development and growth.
Adding to its importance, the Government has recently identified the Textiles Industry
amongst the 25 key sectors, which have the potential to compete with the best in the
world. These sectors have been listed on the ‘Make in India’ web portal and separate
brochures for these sectors will be released along with a general brochure to guide
companies in the industry. (Make in India, n.d.)
As this industry has always been contributing extensively to GDP, employment
generation, total industrial production, etc., it becomes necessary to measure its
145
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
productivity in the recent past so as to understand how it can further be exploited in
context to ‘Make in India’ campaign, which may promote production and job creation in
the sector.
The researchers have selected to undertake a case study of Bombay Dyeing & Mfg. Co.
Ltd in Maharashtra, as it is one of the largest producers of Textiles in India. Productivity
is measured with the help of various appropriate variables using the Productivity model.
The paper analyses and explores into existing deficiencies responsible for low
productivity and suggests strategies that must be adopted to overcome and develop so
that it can largely participate in the ‘Make in India’ campaign.
Maharashtra & Its Textile Sector:
Maharashtra has a flourishing economy which is based on the edifice of a strong
infrastructure. The state has a sound economic and social structure. Maharashtra is rich in
two main industries i.e. Sugar and Textiles. Maharashtra is also one of the largest
producer of cotton in India. In 2012-13 a total 79 lakh bales of cotton was produced in
Maharashtra that amounted to 21.64 per cent of the country’s total production. The state
has witnessed 122 major textiles projects with an investment of USD 224 Million.
Largest number of sector’s 100% Export Oriented Unit (EOU) with a count of 560 is
based in Maharashtra. Maharashtra has abundant raw material available pulling the cost
of textile industry further down. It has one of the best human resource pools because of
traditional textile hubs in the state. It has highest FDI in the country and highest
contribution to India’s GDP. It has top textile players and strong infrastructure.
(Maharashtra Textile Sector, 2014)
In Maharashtra, Bombay Dyeing & Mfg. Co. Ltd is one of the India’s largest producers
of textiles. The daily production at Bombay Dyeing exceeds 300000 meters of fabrics and
it has a distribution chain consisting of 600 plus exclusive shops spread all over the
country. Bombay Dyeing, exports to advanced countries such as U.S.A, countries in
European Union, Australia and Newzealand and its sales turnover is more or less equally
divided between National and International markets. The company was ranked 68 in the
Business India Super 100 list in 1997 and was ranked 300 in the ET 500 list in 2010. The
company sponsors many events, including Bombay Dyeing Gladrags Mrs. India contest.
146
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
So the researchers aim to analyse the productivity and efficiency of Maharashtra textiles
Industry by taking the case study of Bombay dyeing & mfg. Co Ltd. (Bombay Dyeing,
n.d.)
Literature Review:
The growth of an Industry can be well measured by its productivity with the passage of
time. The growth of Industry in any economy reflects the growth and economic
development of that economy. Lots of research work has been done to measure the
productivity of different sectors in India. Productivity is defined as a measure of
quantifying the output against the amount of input. It expresses the relationship between
the quantity of goods and services produced (output) and the quantity of labour, capital,
land, energy, and other resources to produce it (input) (Zandin, 2001). Productivity is the
only meaningful measure of industrial competitiveness.(Khurana & Talbot, 1998) and
hence this topic is widely discussed especially in the manufacturing sector due to its solid
link to the organisational profitability. Profitability of a firm is mainly impacted by two
parameters of which one is productivity and the other is market dynamics. The
relationship between the productivity and profitability indices is analysed in metal
industry of India (Abhishek Sinha, Prabir Kumar Bandyopadhyay, 2014). A
comprehensive study undertaken on firm productivity of Bangladesh manufacturing
industry by Fernandes (2008) has found that the age of the firm has an inverse U-shape
relationship with TFP, whereas the firm size has a negative correlation on TFP. A range
of factors for low productivity has been identified from different studies across the
region. Margo and Sharma (2006) identified the ownership (Private or Public) of the
entity has caused the technical inefficiency of the food sector and the location and size of
the entity have contributed to the technical inefficiency of the textile sector. In the
chemical and metal production sectors, ownership and age of the entity have contributed
to the technical inefficiency.
After reviewing various research papers and literature on this issue, the researchers found
out that though productivity analysis has been done for many industries like steel, paper,
sugar, tea and food sector but very scarce work have been done for Indian textile
industry, particularly the Bombay Dyeing & Mfg. Co. Ltd. The present study is an
147
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
attempt to analyse productivity of textile industry in India using Accounting productivity
model introduced by H. S. Davis on Bombay dyeing & Mfg. Co. Ltd.
Objectives:
1. To explore into and select the variables to measure the productivity of Bombay
Dyeing & Mfg. Co. Ltd;
2. To measure and evaluate the productivity of Bombay Dyeing & Mfg. Co. Ltd
with the help of selected variables applying them on an appropriate model; and
3. To conduct a trend analysis of the productivity of Bombay Dyeing & Mfg. Co.
Ltd. in the past years.
Database and Methodology:
The present study is based on secondary data and covers the period from FY 2010-11 to
2015-16. To achieve the objectives of the study, data has been extracted from financial
statement of the selected company for the period of 5 years.
Productivity Accounting Model used is as follows:
Total Productivity = Qt ÷ (L+C+R=Q)
1. Total Productivity =
Monetary value of Production
Monetary value of Total input required
2. Partial Productivity =
Monetary value of Production
Monetary value of particular input required
148
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Productivity Model for a Textiles Industry:
Input and Output for textiles IndustryIn textiles industry, the following factors of production constitute the input parameters for
measuring productivity of the textiles industry. They are, 1) Labour input (L). 2) Capital
input (C). 3) Material input (R), Miscellaneous input (Q) and the output (Qt) comprises of
the quantity of textile made. Entering these inputs and outputs in the Productivity
Accounting Model researchers obtain the productivity measurement model suited for a
textiles industry. The model is shown below:
Total productivity = Qt ÷ (L+C+R=Q).
In this modified model, all values relating to output and inputs are in monetary equivalent
deflated to a base year using a suitable price index or an average inflation rate so as to
take care of quality.
Output to the Modified Model:
Total Output (Qt): The output (Qt) represents the total sale of textiles in monetary
terms.
Inputs to the Modified Model
The input to the modified model consists of labour, capital and material. All the inputs to
the model are expressed in monetary terms. Detailed description regarding various inputs
to the model in reference to Textiles Industries is presented below:
i) Labour input (L): Labour input comprises the following costs incurred by the textile
industry.
a) Wages for factory workers directly attached to the manufacturing.
b) Wages for indirect factory workers like drivers, electricians etc.
c) Salary of staff.
d) Salary of executives.
e) Contribution to provident and other
f) Workmen and staff welfare expenses
g) Fuel and electricity provided to the workers and staff.
h) Water charges
149
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
i)Repairs: Buildings , Machinery and Others.
ii) Capital input (C): The capital input includes the following expenses of the textiles
estate.
a) Interest on working capital.
b) Interest on long-term expenditure.
c) Depreciation on plant machineries and other capital assets.
d) Other capital input.
iii) Material input (R): This input includes the following costs of the textiles estate.
a) Cost of materials purchased :
1. Cotton
2. Fibre
3. Grey cloth
4. Dyes and chemicals
5. Purified Terepthalic Acid
b) Other material cost.
Miscellaneous input (Q): The expenses relating to the following heads are
considered as miscellaneous input (Q) to the productivity measurement model.
a) Various contract work. b) Purchased repairing. c) Security cost. d) Head office
expenses. e) Social overheads. f) Demurrages. g) Loading and unloading charges. h)
Telephone and charges. i) Legal cost. j) Traveling and transportation expenses of
staff. k) Accommodation and messing charges of guests. l) Infrastructure maintenance
like road, bridge etc. m) other overhead. n) Taxes and levies input o) Transportation
input. (Gupta & Dey, 2010)
150
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Data Implementation on Model :
Table-1.Annual output and consumption of resources in Bombay Dyeing and
Manufacturing Company Ltd.
Year
Labour
Material
Capital
Miscellaneo Total
Total
input, L
input, M
input C
us Input, Q
Input
Output,
(Rs.Cr)
(Rs.Cr)
(Rs.Cr)
(Rs.Cr)
(Rs. Cr)
Qt
(Rs.Cr)
2011
1095.15
1258.54
241.24
140.48
2735.41
2761.78
2012
1103.57
1423.25
241.96
125.13
2893.91
2968.76
2013
327.53
1367.88
236.77
171.57
2103.75
2201.56
2014
285.87
1593.06
251.04
214.73
2344.7
2377.84
2015
819.02
1509.52
274.04
196.25
2798.83
2833.77
Source: http://www.moneycontrol.com
Table-2.Percentage share of different inputs in total input from 2011 to 2015.
151
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Labour
Material
input, L
M
C
Input, Q
2011
40.04
46.00
8.82
5.13
2012
38.13
49.18
8.36
4.32
2013
15.57
65.02
11.25
8.15
2014
12.19
67.94
10.70
9.16
2015
29.26
53.93
9.79
7.01
Year
input, Capital input , Miscellaneous
Source: Prepared by researchers from the Table No. 1
Table-3. Total and partial productivity ratios on yearly basis from 2011 to 2015 for
Bombay Dyeing and Manufacturing Company Ltd.
Year
Labour
Material
Capital
Miscellaneou
Productivity Productivity Productivit s
y
Total Factor
productivity
Productivity
152
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
2011
2.52
2.19
11.44
19.65
1.00
2012
2.69
2.08
12.26
23.72
1.02
2013
6.72
1.61
9.29
12.83
1.04
2014
8.32
1.49
9.47
11.07
1.01
2015
3.46
1.87
10.34
14.44
1.01
Source: Prepared by the Researchers from the Table No. 1
Table-4: Relative productivity levels from 2011to 2015.
Productivity
2011
2012
2013
2014
2015
Labour productivity index
100
106.74
266.65
330.13
137.28
Material productivity index 100
94.97
73.51
68.03
85.38
Capital productivity index
107.17
81.21
82.78
90.38
100
153
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Miscellaneous productivity 100
120.71
65.29
56.33
73.47
102
104
101
101
index
Total productivity index
100
Source: Prepared by the Researchers from the Table No. 1
Following data of relative productivity index from 2011 to 2015 has been represented in
graphical form better understanding.
Source: Prepared by the Researchers from the Table No. 4
Source: Prepared by the Researchers from the Table No. 4
154
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Source: Prepared by the Reseaechers from the Table No. 4
Source: Prepared by the Researchers from the Table No. 4
Source: Prepared by the Researchers from the Table No. 4
155
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Interpretation and Conclusion:
Productivity increases when the growth in output is greater than the growth in input, or
when the rate of growth of output minus the rate of growth of the composite input is
positive. Economic growth can be obtained either by increasing inputs or by improving
productivity factor. Productivity growth occurs when a higher output can be attained with
a given amount of input, or a certain level of output can be attained with smaller amounts
of factor input. This productivity growth is obviously preferable to growth due to increase
in factor inputs, since the later might be subject to diminishing marginal return.
Productivity growth is necessary not only to increase output but also to enhance
competitiveness of the industry in as well as outside a country. The estimation of factor
productivity is very useful to evaluate the variations in the performance of an industry
over a period of time. The prosperity of a new developed nation has been attributed
mainly to the sustained growth of their Total Factor Productivity (Prescott, 1997).
In this paper the researchers have analyses productivity through input and output of
Bombay Deing & Mfg Company Ltd. The monetary equivalent of output is calculated by
multiplying the quantity of made textiles (output) expressed in metre with the price of
made textiles in the concerned year.The monetary equivalent of textiles output computed
this way truly represents variation of quantity and quality of the product (Gupta & Dey,
2010). Once the output is measured, all the four inputs are measured in the same fashion.
Table-1 summarizes annual consumption of four resources (input) and output for the five
years under study. Table-2 shows the percentage share of different inputs in total input.
From these data Partial Productivities with respect to each of the four inputs computed
for each year along with the corresponding annual Total Factor Productivity which is
presented in Table-3. Labour productivity is measured by the ratio of output over labour
input. Material productivity is measured by the ratio of output over material input.
Capital productivity is measured by the ratio output over capital input. Capital input is
expressed as sum of depreciation, operative interest, premiums and other capital
expenditures. The cost structure for different measurement periods was easy to achieve,
because of the regular maintenance of the scientific accounting system.
156
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
Table: 1 reflects that the industry is facing major challenges in the form of rising
production cost from increasing wages, power, interest cost and miscellaneous expenses.
Key threats for the Company continue to be cheap imports from China, launch of new
brands and competitors in the market. Also, existing market players have become more
aggressive through competitive pricing. Higher margin demand from large retailers is
also putting pressure on the Company’s margin. Additionally, EU has given a special
status of “GSP+” to Pakistan w.e.f. 1st January, 2014 resulting in a price disadvantage of
almost 9% to Indian exporters to this region. Further, the Indian currency after huge
depreciation during the last year has started appreciating against the US$ which might
erode India’s price competitiveness against other exporting countries.
To explore the causes of poor productive efficiency we have to work out and analyse the
partial productivity level. Two major inputs such as labour and material which form 80%
to 85% of the total input for the years studied has followed a general declining trend in
their productivity indices during the entire period as depicted in Table-4. This establishes
that the efficiency in the utilization of these major inputs has gone down causing apparent
encouraging trend in capital productivity level as a result of input substitution effect.
Concluding that the causal factor for the productivity decline in the Bombay Dyeing and
Mfg Co. ltd is the poor resource utilization of major inputs namely labour and material.
(Annual report of Bombay Dyeing, 2014)
Reasons for the low productivity of the Bombay Dyeing and Mfg. Company Ltd are that
due to inaccessibility of resources or excessive time expended to acquire and use them,
most of the cotton textile mills are working with old and obsolete machinery. Obsolete
machinery leads to low output and poor quality of goods as a result of which textile
goods are not able to face competition in the International market. It is also identified that
poor management practices are often the main underlying factors behind the ineffective
use of resources in Bombay dyeing and Mfg. company Ltd .As a result, workers and
machines often get idled which impede the work sequence and progress.
157
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
It is also found that the rainfall is likely to be below average as per the India
Meteorological Department (IMD), which may push raw material prices higher, resulting
in pressure on both sales as margins. Due to this profitability has been affected which
leads to reduction in average net sales in Bombay Dyeing and Mfg. Co. Ltd. (Annual
Report of Bombay Dyeing, 2015) Problems like outdated technology and fragmentation
of operations, which were more prevalent in most of the Textile industry in Maharashtra,
lead to low level of labour Productivity. The Bombay dyeing and Mfg. Company Ltd in
Maharashtra found it difficult to retain the best workers and hence the cost of retention
went up. There was no proper planning to cater to the needs of this fast growing industry
leading to water pollution and congestion. Intermittent power supply, water scarcity,
infrastructural problems and other bottlenecks affected the business performance and
labour productivity level.
Suggestion and Recommendation:
Productivity is considered the main value adding strategy within the manufacturing
sector. Therefore, productivity issues and related problems faced by manufacturing
industry will need to be considered and viewed from various angles. The evidences
suggest that the low productivity is a critical issue that hinders economic growth of
developing countries. Most of the time low productivity in manufacturing industry is
attributable to labour unrest, poor working attitudes, inefficient organisational
culture/management, etc. which are directly related to labour productivity. Labour
Productivity can be improved by imparting knowledge and skills to the workforce by
arranging training programmes with experts both from India and abroad. With the advent
of latest trends in the production process textiles, the textiles units should establish
collaborative arrangements with similar industries in India and abroad. It was also
concluded that in order to achieve more efficiency in productivity, the textiles industry
should focus on:
158
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
I.
Employment of skilled labor
II.
Training of existing labor
II.
Up gradation of technology
III.
Setting up of more centers for excellence
IV.
Government support in international collaboration for technical knowhow.
Conclusion:
After analyzing the productivity of Bombay Dyeing & Mfg. Co. Ltd., it may be
concluded that the Textiles Industry in general and Bombay Dyeing & Mfg. Co. Ltd. in
particular is possessing several weaknesses which is responsible for poor productivity.
The researchers strongly believe that until and unless the government does not focus
upon the thrust areas overall improvement in textile productivity is unattainable. Making
efforts to monitor, control and improve these factors is the only way to upgrade the
productivity of this Industry. Hence to make the mission of ‘Make in India’ a success
government must concentrate and remove the weaknesses of the Industry and make all
efforts for up gradation and improvement of the existing Industry.
Reference:
1. Annual Report of Bombay Dyeing (2014).Retrieved from
http://teknowits.com/bombaydyeing/Document/Annual%20Report%202013-14.pdf
2. Annual Report of Bombay Dyeing (2015).Reteived from
http://teknowits.com/bombaydyeing/Document/BDMC_AR2015%20for%20website%20
2.pdf
3. Bombay Dyeing.(n.d.).Bombay Dyeing India. Retrieved from
https://en.wikipedia.org/wiki/Bombay_Dyeing
4. Fernandes, A.M. (2008).Firm Productivity in Bangladesh Manufacturing Industries.
World Development, 36(10), 1725–1744.
5. Gupta, R., Dey, S. K.(2010).Development of a Productivity Measurement Model for
Tea Industry. ARPN Journal of Engineering and Applied Sciences, 5(12), 1819-6608
159
IRACST – International Journal of Commerce, Business and Management (IJCBM), ISSN: 2319–2828
Vol. 5, No.1, Jan-Feb 2016
6. India brand Equity Foundation. (2016).Textiles Industry in India. Retrieved from
http://www.ibef.org/industry/textiles.aspx
7. Khurana, A. & Talbot, B. (1998).The Internationalization process model through the
lens of the global color picture tube industry. Journal of Operations Management, 16(23), 215–239.
8. Maharashtra Textile Sector. (2014). Retrieved From http://www.midcindia.org/
9. Make In India. (n.d.).Textiles and Garments. Retrieved from
http://www.makeinindia.com/sector/textiles-and-garments
10. Margono, H. & Sharma, S.C.(2006).Efficiency and productivity analyses of
Indonesian manufacturing industries. Journal of Asian Economics, 17(6), 979–995.
11. Prescott, E.C (1997), ‘Needed: A theory of total factor productivity’, Federal Reserve
Bank of Minneapolis, Research department staff report no.242, Minnesota, US. Ray.
12. Zandin, K.B. (2001).Maynard’s Industrial Engineering Handbook (5th Edition) 5th
ed., McGraw-Hill.
160