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Globalization and Foreign Direct Investment (FDI) play an important role in the development of developed, developing as well as underdeveloped economies. The reasons are simple like introduction of new products, new skills, easy approachable markets and modern technology to the host countries. Every country around the world is playing an important role in the encouragement of foreign and overseas investors and their investments. India is being ranked as the second most favored destination for foreign investments after China by showing consistent growth year after year.
The textile industry is one of the most important industries of the Indian economy and it is the second largest provider of employment after agriculture. It has witnessed phenomenal growth in recent years and attracted fair amount of foreign direct investment (FDI). The textile and apparel industry in India is estimated to be about US$ 36 billion. It is the largest foreign exchange earner, contributing to approximately 15% of India’s exports and 14% of industrial output. India’s solid performance and growth in textile sector is fuelled by several key advantages that the country enjoys in terms of abundant availability of raw material and cheap labour, large domestic market, presence of supportive industries and supportive policy initiatives by the government.
The opportunity in Indian textiles and apparel industries are very large. India has a complete supply chain from a vast raw material supply to high quality finished products. Labour costs are among the lowest in the world. Indian firms offer experience, entrepreneurship and design skills which Chinese firms find hard to match. This is also highly adaptable, smaller firms offer the flexibility needed for smaller orders while vast firms have the capacity to service the world's biggest buyers. Government policies are changed and Indian economy opens up to the outside world, foreign investment opportunities are being transformed.
The Indian government has formally issued a notification permitting 100 percent foreign direct investment (FDI) in single-brand retail, from the earlier policy of 51 percent. Until now, global retailers owning a single-brand had to partner with an Indian entity, as the cap on foreign equity was 51 percent. However there is a clause which makes it mandatory for retailers to source 30 percent of their products sold from the Indian small/village/cottage industries. This will help attract investments in production and marketing and encourage sourcing of goods from India.
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