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BACKGROUND: THE GROWTH OF FASHION INDUSTRY IN INDIA
India is the second largest producer of textiles and garments in the world. The abundance of raw materials such as cotton, wool, silk and jute, coupled with the skilled workforce have made the fashion industry in India witness a paradigm shift and an unprecedented robust growth. The textile industry accounts for 14% of industrial production, which is 4% of India’s Gross Domestic Product (GDP), and employs nearly 45 million people and accounts for a 12% share of the country’s total exports.1 The potential size of the Indian textiles and apparel industry is expected to reach USD 223 billion by 2021.2
The burgeoning purchasing power of the Indian customer and his ever evolving fashion palate (partly attributable to his global exposure through travel and media) coupled with the relaxation of Indian government's policies on foreign investment in retail have given the fashion moguls of the world the much required impetus to set up shop in India. The Indian film industry and "Bollywood" in particular has been the evergreen mascot for promoting Indian fashion wear and designers both on and off screen. Millions of Bollywood fans in India act as a target audience for the latest trendsetting attire worn by their favorite stars in theatres and on television. Participation of Indian designers in renowned fashion events abroad with the likes of the Paris & Milan Fashion Week has established India as a trendsetter to reckon with on the map of the fashion industry. India has now become an important fashion destination and is featured as a part of the business plans of many global fashion houses and apparel companies.
The fashion industry is split into five major categories:
IMPORTANT TRENDS IN THE INDUSTRY
Fervent protection of Intellectual Property Rights
The tremendous growth and the huge revenue potential of the fashion industry have made designers and fashion houses realize the importance of protecting their rights in the designs they create, both on and off the ramp.
The fashion industry is taking keen interest in educating themselves about their intellectual property rights. A proactive registration of the works to secure better protection of their rights is the order of the day. These fashion houses and designers have also resorted to taking strong actions against people who infringe upon their original creative works. Some examples include those of popular designers like Tarun Tahiliani and Suneet Verma who have, in the recent past, dragged the infringers of their design to the courts and sought protection of their intellectual property rights. These trends signify that the industry players are conscious of their rights and are willing to pursue actions against the infringers who violate them.
Popular business models adopted by foreign players
Historically, foreign players have typically entered the Indian market through the franchise model or via joint ventures arrangements.
The virtual shopping mall
While the idea of e-commerce has been around for more than a decade, the convenience of shopping at the tips of your fingers has recently caught the fancy of the Indian consumers. In the past few years, online shopping portals have grabbed the fancy and attention of all types of consumers. Click and shop is the mantra of today's educated customer. E-retail in both its forms – online retail and marketplace is the fastest growing segment, increasing its share from 10% in 2009 to an estimated 18% in 2013. The size of the e-retail industry in India is poised to be between USD 10-20 billion by 2017-2020.4
By eliminating the need of physical structures and heavy rents, these "virtual shopping malls" have proven to be a more economical and preferred option for various fashion retailers who do not have to worry about stocking risks at all. It is estimated that the total spend on warehousing and sortation centres could be as high as 3%-6% of top-line revenues – representing USD 450-900 million of spending on warehousing till 2017-2020. The industry is expected to spend an additional USD 500 – 1000 million in the same period on logistics functions, leading to a cumulative spend of USD 950-1900 million till 2017-2020.5 Various fashion brands have also jumped on to this popular band-wagon for showcasing their wares. These e-retailers provide facilities such as home delivery, returns, cash on delivery, thus luring customers to make online purchases without physically examining the product. Global and local e-commerce retailers like Fashionandyou, Myntra, Flipkart, Jabong, Snapdeal and Amazon have launched websites that offer Indian consumers a wide range of products such as apparel and accessories apart from other lifestyle products. Such e-commerce websites have taken a step further by launching mobile applications where customers may view, select and purchase products at their fingertips on the go.
Impact of shift from custom work by tailors to ready-to-wear:
Over the last several years, the consumers' preferences of apparel purchases have shifted from custom work by tailors to ready-to-wear. The need for convenience, quality and reduced waiting period to receive a finished garment has fuelled an increase in demands and production for "ready to wear" products. Due to this, local artisans and self-employed workers are being increasingly displaced by wageworkers, which threatens local techniques and skills.
MAJOR PLAYERS IN INDIA
Noteworthy Foreign Players & Foreign Brands - Zara, Mango, Marks & Spencer, Charles & Keith, Hush Puppies, Diesel, Nautica, etc.
Noteworthy Indian Players - Provogue, Wills Lifestyle, Reliance Footprint, Woodland
Noteworthy Indian Designers of international repute - Ritu Kumar, Ritu Beri, Manish Malhotra, Tarun Tahiliani, JJ Valaya, Rohit Bal, Abu Jani and Sandeep Khosla, Wendell Rodricks, Neeta Lulla and Reena Dhaka
Following the global trends, proactive efforts have been taken by industry bodies such as Fashion Foundation of India (FFI) representing the leading designers taking up IP infringement issues and other issues affecting the industry. These industry bodies are not only concentrating on the protection of IPRs, but are also involved in research through its Research and Analysis cell to provide various aspects of fashion industry. Additionally, FFI is also setting up a legal cell to assist the design houses in the matters relating to IPR, licensing, arbitration etc. Some of the other noteworthy industry organizations are Fashion Design Council of India ("FDCI") and Apparels Export Promotion Council ("APEC").
12TH FIVE YEAR PLAN
The main objectives of the 12th Five Year Plan 2012-17 (“12 FYP”) are as follows:
Infrastructure: The Scheme for Integrated Textile Parks (SITP), launched in 2005 to neutralize the non-availability of quality infrastructure, has seen only 9 projects completed out of 40. Under the 12 FYP there is an objective of setting up Integrated Apparel Clusters (IAC), as activities laid down in the Technology Mission for Knitwear and Wovenwear would be subsumed in SITP.
Jute: One of the major focuses of the 12 FYP is to “implement regulatory framework in specified areas, encouraging indigenous production of specialty fibres and yarns, encouraging investment in high end technical textiles products, including FDI, encouraging R&D in technical textiles, formulation and notifications of standards by BIS and ensuring availability of data base.”
Silk: With an objective to achieve the targeted silk production,6 efforts would be made in R&D, technology transfer and enterprise development, creating an inbuilt pyramid structure of federated farmers and farmer associations to synergise and synchronise the production processes.
Wool and Woollens Textiles: The woollen industry in India is broadly divided and scattered between the organized and decentralised sectors. During the period 2009–10 and 2014–15, exports of woollen yarn fabrics and made-ups are expected to record a CAGR of 11.6%. A proper database and action plan is aimed to be introduced to reduce the mortality of sheep, increase coverage of sheep insurance and improving the productivity in wool production.7
Some of the major points to be noted from the Budget 2014-15 (“Budget”) are as follows:
Some key points pertaining to textile and handlooms are:
LEGAL AND TAX FRAMEWORK
Important laws affecting the industry
Thus, artistry becomes a subject matter of protection under the Copyright Act, 1957 as soon as the works are created. However, copyright in any design which is capable of being registered under the Designs Act, 2000 ceases as soon as any article to which the design has been applied is reproduced more than fifty times by an industrial process.
Thus, the brand names and trademarks become the subject matter of protection under the Trade Marks Act, 1999.
Thus, designs which appeal solely to the eye (such as motif designs) and which are likely to be reproduced more than fifty times by an industrial process become the subject matter of protection under the Design Acts 2000.
Tax laws affecting the industry
1 Note on Indian textile and clothing exports – International Trade Section, last updated: November 3, 2014. http://texmin.nic.in/sector/note_on_indian_textile_and_clothing_exports_intl_trade_section.pdf. Last Accessed: December 24, 2014.
2 http://www.ibef.org/industry/textiles.aspx. Last Accessed: December 24, 2014
3 DuPont, Reliance & Vipul Sarees launch ‘green’ saree line; dated December 23, 2014. Available at: http://www.fibre2fashion.com/news/fashion-news/newsdetails.aspx?news_id=169671. Last visited: December 24, 2014
4 Evolution of e-commerce in India – creating the bricks behind the clicks, Available at: http://www.pwc.in/assets/pdfs/publications/2014/evolution-of-e-commerce-in-india.pdf. Last visited: December 24, 2014.
6 32,000 M.T. at a CAGR of 7.14% by the terminal year of the 12 FYP
7 Twelfth Five Year Plan (2012-2017) – Economic Sectors – Volume II. http://planningcommission.gov.in/plans/planrel/12thplan/pdf/12fyp_vol2.pdf. Last Accessed: December 24, 2014.
8 Polytetramethylene ether glycol (PT MEG) and Diphenylmethane 4,4 di-isocyanate (MDI)
9 GST Bill to be introduced but not passed in winter session 2014; dated December 18, 2014. Available at: http://www.dnaindia.com/india/report-gst-bill-to-be-introduced-but-not-passed-in-winter-session-2014-2045161. Last accessed: Dece,ber 24, 2014.
10 http://gstindia.com/. Last accessed: December 24, 2014.