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Textile Industry in India
The textile industry holds significant status in the India. Textile industry provides one of the most fundamental necessities of the people. It is an independent industry, from the basic requirement of raw materials to the final products, with huge value-addition at every stage of processing.
Today textile sector accounts for nearly 14% of the total industrial output. Indian fabric is in demand with its ethnic, earthly colored and many textures. The textile sector accounts about 30% in the total export. This conveys that it holds potential if one is ready to innovate.
The textile industry is the largest industry in terms of employment economy, expected to generate 12 million new jobs by 2010. It generates massive potential for employment in the sectors from agricultural to industrial. Employment opportunities are created when cotton is cultivated. It does not need any exclusive Government support even at present to go further. Only thing needed is to give some directions to organize people to get enough share of the profit to spearhead development.
Textile industry is constituted of the following segments
o Readymade Garments
o Cotton Textiles including Handlooms (Millmade / Powerloom/ Handloom)
o Man-made Textiles
o Silk Textiles
o Woollen Textiles
o Handicrafts including Carpets
The cottage industry with handlooms, with the cheapest of threads, produces average dress material, which costs only about 200 INR featuring fine floral and other patterns. It is not necessary to add any design to it. The women of the house spin the thread, and weave a piece in about a week.
It is an established fact that small and irregular apparel production can be profitable by providing affordable casual wear and leisure garments varieties.
Now, one may ask, where from the economy and the large profit comes in if the lowest end of the chain does not get paid with minimum per day labour charge. It is an irony of course. What people at the upper stratum of the chain do is, to apply this fabric into a design with some imagination and earn in millions. The straight 6 yards simple saree, drape in with a blouse with embroideries and bead work, then it becomes a designer¡¦s ensemble. For an average person, it can be a slant cut while giving it a shape, which can double the profit. Maybe, the 30 % credit that the industry is taking for its contribution to Indian economy as good as 60 % this way. Though it is an industry, it has to innovate to prosper. It has all the ingredients to go ahead.
Textile exports are targeted to reach $50 billion by 2010, $25 billion of which will go to the US. Other markets include UAE, UK, Germany, France, Italy, Russia, Canada, Bangladesh and Japan. The name of these countries with their background can give thousands of insights to a thinking mind. The slant cut that will be producing a readymade garment will sell at a price of 600 Indian rupees, making the value addition to be profitable by 300 %.
Currently, because of the lifting up of the import restrictions of the multi-fibre arrangement (MFA) since 1st January, 2005 under the World Trade Organization (WTO) Agreement on Textiles and Clothing, the market has become competitive; on closer look however, it sounds an opportunity because better material will be possible with the traditional inputs so far available with the Indian market.
At present, the textile industry is undergoing a substantial re-orientation towards other then clothing segments of textile sector, which is commonly called as technical textiles. It is moving vertically with an average growing rate of nearly two times of textiles for clothing applications and now account for more than half of the total textile output. The processes in making technical textiles require costly machinery and skilled workers.
The application that comes under technical textiles are filtration, bed sheets and abrasive materials, healthcare upholstery and furniture, blood-absorbing materials and thermal protection, adhesive tape, seatbelts, and other specialized application and products.
. India enjoys benefit of having plentiful resources of raw materials. It is one of the largest producers of cotton yarn around the globe, and also there are good resources of fibres like polyester, silk, viscose etc…
. There is wide range of cotton fibre available, and has a rapidly developing synthetic fibre industry.
. India has great competitiveness in spinning sector and has presence in almost all processes of the value chain.
. Availability of highly trained manpower in both, management and technical. The country has a huge advantage due to lower wage rates. Because of low labor rates the manufacturing cost in textile automatically comes down to very reasonable rates.
. The installed capacity of spindles in India contributes for 24% share of the world, and it is one of the biggest exporters of yarns in the global market. Having modern functions and favorable fiscal policies, it accounts about 25% of the world trade in cotton yarn.
. The apparel industry is largest foreign exchange earning sector, contributing 12% of the country’s total exports.
. The garment industry is very diverse in size, manufacturing facility, type of apparel produced, quantity and quality of output, cost, requirement for fabric etc. It comprises suppliers of ready-made garments for both, domestic or export markets.
A major loop-hole in Indian textile industry is its huge fragmentation in industry structure, which is led by small scale companies. Despite the government policies, which made this deformation, have been gradually removed now, but their impact will be seen for some time more. Since most of the companies are small in size, the examples of industry leadership are very few, which can be inspirational model for the rest of the industry.
The industry veterans portrays the present productivity of factories at half to as low as one-third of levels, which might be attained. In many cases, smaller companies do not have the fiscal resources to enhance technology or invest in the high-end engineering of processes. The skilled labor is cheap in absolute terms; however, most of this benefit is lost by small companies.
The uneven supply base also leads barriers in attaining integration between the links in supply chain. This issue creates uncontrollable, unreliable and inconsistent performance.
Political and Government Diversity:
The reservation of production for very small companies that was imposed with an intention to help out small scale companies across the country, led substantial fragmentation that distorted the competitiveness of industry. However, most of the sectors now have been de-reserved, and major entrepreneurs and corporate are putting-in huge amount of money in establishing big facilities or in expansion of their existing plants.
Secondly, the foreign investment was kept out of textile and apparel production. Now, the Government has gradually eliminated these restrictions, by bringing down import duties on capital equipment, offering foreign investors to set up manufacturing facilities in India. In recent years, India has provided a global manufacturing platform to other multi-national companies that manufactures other than textile products; it can certainly provide a base for textiles and apparel companies.
Despite some motivating step taken by the government, other problems still sustains like various taxes and excise imbalances due to diversification into 35 states and Union Territories. However, an outline of VAT is being implemented in place of all other tax diversifications, which will clear these imbalances once it is imposed fully.
In India, labour laws are still found to be relatively unfavorable to the trades, with companies having not more than ideal model to follow a ‘hire and fire’ policy. Even the companies have often broken their business down into small units to avoid any trouble created by labour unionization.
In past few years, there has been movement gradually towards reforming labour laws, and it is anticipated that this movement will uphold the environment more favorable.
Distant Geographic Location:
There are some high-level disadvantages for India due to its geographic location. For the foreign companies, it has a global logistics disadvantage due the shipping cost is higher and also takes much more time comparing to some other manufacturing countries like Mexico, Turkey, China etc. The inbound freight traffic has been also low, which affects cost of shipping – though, movement of containers are not at reasonable costs.
Lack of trade memberships:
India is serious lacking in trade pact memberships, which leads to restricted access to the other major markets. This issue made others to impose quota and duty, which put scissors on the sourcing quantities from India.
It is anticipated that India’s textile industry is likely to do much better. Since the consumption of domestic fibre is low, the growth in domestic consumption in tandem is anticipated with GDP of 6 to 8 % and this would support the growth of the local textile market at about 6 to 7 % a year.
India can also grab opportunities in the export market. The industry has the potential of attaining $34bn export earnings by the year 2010. The regulatory polices is helping out to enhance infrastructures of apparel parks, Specialized textile parks, EPZs and EOUs.
The Government support has ensured fast consumption of clothing as well as of fibre. A single rate will now be prevalent throughout the country.
The Indian manufacturers and suppliers are improving design skills, which include different fabrics according to different markets. Indian fashion industry and fashion designers are marking their name at international platform. Indian silk industry that is known for its fine and exclusive brocades, is also adding massive strength to the textile industry.
The industry is being modernized via an exclusive scheme, which has set aside $5bn for investment in improvisation of machinery. International brands, such as Levis, Wal-Mart, JC Penny, Gap, Marks & Spencer and other industry giants are sourcing more and more fabrics and garments from India. Alone Wal-Mart had purchased products worth $200mn last year and plans to increase buying up to $3bn in the coming year. The clothing giant from Europe, GAP is also sourcing from India.
As a result of various initiatives taken by the government, there has been new investment of Rs.50,000 crore in the textile industry in the last five years. Nine textile majors invested Rs.2,600 crore and plan to invest another Rs.6,400 crore. Further, India’s cotton production increased by 57% over the last five years; and 3 million additional spindles and 30,000 shuttle-less looms were installed.
Forecast till 2010 for textiles by the government along with the industry and Export Promotion Councils is to attain double the GDP, and the export is likely attain $85bn. The industry is anticipated to generate 12mn new jobs in various sectors.
How to uphold textile Industry
Weak infrastructure may be a hindrance which can be overcome with better network and with the willingness to share profit by loyalty bottom up and patronization from above downwards.
. By putting more retail outlets,
. With better value added products,
. By taking the lowest end of the chain into confidence and building their capability to innovate more and more.
. By upholding the market knowledge at every level that happens at higher-end that lifts the chain.
. By building on the expertise for technical textiles that include bed sheets; filtration and abrasive materials; furniture and healthcare upholstery; thermal protection and blood-absorbing materials; seatbelts; adhesive tape, etc which need skilled workers who are not easy to find in an Indian market.
. By keeping a regular research and development department with regards to the industry
. By building up the peripheral market with regular update of new accessories.
. By integrating the disorganized sectors into one segment that is functionally independent of each other’s unwanted stranglehold
. By putting affiliated efforts into the sector
. By creating a state owned cargo-shipping mechanism : with rationalizing fiscal duties; upgrading technology through the Technology Up-gradation Fund Scheme (TUFS);
. By setting up of Apparel Parks
. By clearing off bottlenecks in the form of regulatory practices
. By replacing the indirect taxes with a single nationwide VAT
. With liberalization of contract norms for textile and garments units
. By controlling export of raw materials
. By curtailing the drawback claims falsely boosted invoice value of exports
. By effectively installing a price discovery mechanism to track market trend to take effective measures before hand a slump
How to promote textile exports
For promotion of exports the measures which should be taken up are
. Up gradation of textiles sector
. Policy level decision to achieve export target
. Woven segment of readymade garment sector and knitwear have been de-reserved
. Technology Up-gradation Fund Scheme to be pursued till next five years
. Liberalization of FDI Policy with up to 100 per cent foreign equity participation
. Import of capital goods at 5% concession rate of duty with appropriate export obligation under
Export Promotion Capital Goods (EPCG) Scheme and clearly laid out EXIM policy
. Advance Licensing Scheme with standard input-output norms
. Prescribed Duty Exemption Pass Book (DEPB) Scheme credit rates
. Duty Drawback Scheme wherein the exporters are allowed refund of the excise and import duty loss on raw materials
. Construction of Apparel International Mart by Apparel Export Promotion Council to provide a world class facility to the apparel exporters to exhibit products and built international reputation
. Setting up of quality checking laboratories
. Apparel Park for Exports Scheme to invite international production units along with in-house production floors.
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