chapter 3 sports goods industry at national...
TRANSCRIPT
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Chapter 3 Sports Goods Industry at
National Perspective
3.1 Background
There is no formal definition of sports. It can be a game, a fitness
activity or an organized competitive sport. Competitive sports are governed by a
set of rules often designed by national or international sports organizations.
Sports can also be a recreational activity. The same sport can be played as a
competitive sport or fitness activity (for instance, swimming or cycling).
Different people treat sports differently. For some, it is a profession, while for
most, it is just a means of recreation and staying fit. Sports can be an indoor
activity or an outdoor. It can be a team activity (for example cricket and hockey
etc.) or an individual activity (for example squash).While most of the sports are
associated with some form of physical activity. Globally, there are large
numbers of sports and each can be played in multiple formats.
All sports require some kind of infrastructure, but the requirements
vary across different sports. For example, team sports like football, cricket and
hockey require stadiums while chess can be played in a room with a chessboard.
Similarly, all sports require some sports product. For instance, a person can stay
fit by running for which he needs a running shoe or by skipping for which there
is a requirement of skipping rope. Sports like cricket, hockey and tennis require
equipment like bat, balls, kneepads, specialized shoes and racquets. In the past,
many sports equipment/goods were unbranded, but with increased
sophistication and research and development, branding and specialized
equipment manufacturers have emerged. Proliferation of brands and
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specialization in manufacturing has led to the growth of sports product
marketing. At the national level, sport and physical education contribute to
economic and social growth, improves public health and bring different
communities together.
It is an important component of human capital development. At the
global level, sports and physical education can have a long-lasting positive
impact on development of poor countries through various linkages like
development of tourism sector. It helps to maintain international peace and
promotes cordial international relations through international sporting events.
Sports goods manufacturing and marketing in this context has emerged as a
potential business avenue in developing countries like India due to availability
of cheap labour and raw material.
3.2 Emergence of sports goods industry
Cricket, tennis, hockey and football were introduced by the British
army in India. With the increase in British presence the demand for the sporting
hardware also increased. The elite and thereafter the middle class Indians
followed this trend. Those were days when goods took weeks to arrive from
England and had prices out of reach of the average Indian.
The origin of the sports goods industry in pre-independence India
can be traced back to Sialkot (now in Pakistan). Situated in the foothills of the
mountains, it was an ideal place to grow trees needed for wood, called willow,
to make cricket bats and hockey sticks. Production started off with a British
colonel suggesting Mr Gainda Singh Oberoi, a local wood dealer, to
manufacture tennis racquets out of mulberry, which was then used only as
domestic fuel. Thus the first sports goods factory (Oberoi Limited) was set up in
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1888 in Sialkot. India’s debut in hockey, in the 1928 Amsterdam Olympics,
gave the industry a boost. Sialkot started producing hockey sticks as well as
footballs and the industry flourished.
After independence, a portion of entrepreneurs and workers
decided to shift from Sialkot (by then Pakistan) to India. Initially the migrants
settled in Batala (Punjab), which was nearer to Sialkot and close to mountain
where the typical wood needed for sports items could be grown. Subsequently,
according to a resettlement plan of the Government of India, entrepreneurs and
workers settled in Jalandhar (Punjab).
Later, a section of the industry also settled in Meerut, the town of
the neighbouring state of Uttar Pradesh, where wood and leather were also
available in plenty. The added advantage was proximity of Meerut to Delhi (the
national capital of India), which emerged as a large market for sports goods.
Today, Meerut, one of the important industrial towns of the
western Uttar Pradesh, like Jalandhar in Punjab, is a main centre for
manufacture and export of sports goods in India. According to the sources
Meerut clocks a business turnover of more than Rs. 400 crores. It is known for
high quality cricket gear.
The Indian sports goods industry manufactures 318 items.
However, major items that are exported are inflatable balls, hockey sticks and
balls, cricket bats and balls, boxing equipment, fishing equipments, indoor
games like carom and chess boards and different kinds of protective equipment.
Due to manual manufacturing processes, the Indian sports goods
industry can be considered to be the highly labour intensive and provides
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employment to the weaker sections of society which employs the large number
of women. Growth over the past six decades now occupies a place of
prominence in the Indian economy in view of its massive potential for
employment, growth and export. There has been an increasing emphasis on its
planned development, improvement of product design and technology and
building up of competitiveness.
According to Ministry of External Affairs (Government of India),
the Indian growth story seems to be on a roll and India has emerged as the
fourth largest economy in the world on the purchasing power parity basis. The
quality of business environment in India has improved manifolds in the recent
years.
Government policies, federations, sourcing by large buyers such as
clubs and academies and individual consumer drives the sports market in any
country. The market is also influenced by the level of sports participation,
passion for a specific sport, availability of infrastructure, the country’s
topography and climate etc.
3.3 Global recognition of Indian sports goods
industry
Most countries have sports associations or federations that are
responsible for promoting and developing different sports in their countries.
These federations work closely with the government to develop infrastructure,
administration, training facilities, management and participation of
sportspersons in international events. They are also responsible for procuring
sports equipments.
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With the privatization and commercialization of sports, sports
clubs, academies and teams have opened the new options for private sector.
They play a key role in the promotion, training and marketing of sports. They
also contribute to the development of sports infrastructure and play a crucial
role in selecting sports equipments.
People’s passion for sports, their level of participation and their
willingness to pay for sports products influences the sports retail market. In
each country, certain sports dominate. These sports have huge fan followings
and this drives the market for sports products and accessories. For instance, in
India, cricket is the most popular sport; in the United States (US), it is American
football, basketball and baseball.
An estimates for this industry shows that though this sector has a
low value added contribution, the recorded employment growth has been
around 11.5 percent per annum for the period 1990-2003, which is much above
the average of the whole intensive sectors (4.1 percent per annum). Further, it
has been estimated that with around 60 percent of the sports goods
manufactured in India being exported. This sector holds immense importance as
far as employment generation potential is concerned.
3.4 Sports goods clusters
The sports goods industry in India is concentrated in select
geographical locations all over the country. The major manufacturing clusters
are in and around Jalandhar, Meerut, Delhi (including Gurgaon), Mumbai,
Kolkata and Chennai. However, India’s sports goods industry is largely
concentrated in Meerut and Jalandhar where the production system is highly
fragmented in tiny units using almost handicraft type of production.
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Major Sports Good’s manufacturing clusters and major product
categories of sports goods produced are compiled in Table 3.1.
Table 3.1: Major sports goods clusters and product categories
S.
No. Location/ Cluster Major Product Categories
1. Jalandhar
Inflatable balls (Soccer/ Rugby/ Volley/ Net/ Hand
and Basket Ball) in PU and PVC; Boxing
equipments; Cricket equipment; Sports ware; Track
and Field equipments; Sports training equipments;
Hockey equipments; Hockey foam moulded goalie
range; Ship guards and all kinds of Nettings etc.
2. Meerut
Weight lifting equipments; Cricket equipments;
Athletics equipments; Boxing equipments; Table
tennis; Badminton; Carom board; Fitness and
exercise equipments; Lane markers; Basket ball;
Netball rings; Table Tennis accessories and Sports
apparels etc.
3. Jammu & Kashmir Cricket bats
4. Delhi
Football; Carom board; Chess; Cricket equipment;
Billiards/Snooker/Pool Tables; Football bladders;
Boxing equipments; Helmets and Educational
puzzles etc.
5. Gurgaon Golf equipments and Board games etc.
6. Mumbai Water park slides; Carom board; Fitness equipment;
Sports nets and Helmets etc.
7. Kolkata Skipping rope; Carrom board; Magic tricks and
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magic apparatus etc.
8. Chennai Tennis balls; Sports shoes and apparels etc.
9. Bangalore Bowling equipments; Sports medals and trophies;
Gym and health equipments etc.
Source: Dubey and Singh (2011)
3.4.1. Jalandhar cluster
The sports goods manufacturing cluster of Jalandhar is a unique
example of transplanted cluster, where a major segment of an existing cluster
shifted lock stock and barrel (the entrepreneurs, the workers and the raw
material suppliers) to a new location due to political division of the country in
the year 1947.
Jalandhar is an important supplier of quality sports goods to more
than 130 countries including some of the most developed nations of the world.
The Jalandhar based industry is rapidly embracing new technology and adapting
its products to keep up with the changing global trends so as to emerge as the
most important centre for the manufacture of sports goods. According to the
Sports Goods Manufacturers and Exporters Association (SGEMA), total
number of persons working in the industry is about 1, 70,000.
3.4.2. Meerut cluster
Total number of units estimated in the cluster is approximately
3350 out of which 1250 are registered and 2100 unregistered enterprises.
According to different sources about 1, 70,000 workers are employed in these
units with annual turnover of Rs. 200 Crores (approximate). Major products are
cricket gears, racket, tennis ball, nets, athletic equipment, protection accessories,
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kit bags, sports wears, all type of indoor games, boxing gloves, health
equipment and toys etc.
3.4.3 Kashmir cluster
The history of sports goods, particularly cricket bat industry in
Kashmir, goes back to pre-partition days when Sialkot (now in Pakistan) was
the sports goods centre. With the partition of the Indian sub-continent, the
skilled craftsmen of Sialkot shifted to Jalandhar, Meerut and the cleft makers of
Kashmir turned toward these newly established centers.
The Department of Bio-Technology, Government of India, has
sponsored a project for the cultivation and propagation of economically
important willows as source of income for women living in rural areas of
Kashmir. The training centre of women living in rural areas are being provided
skill training at Halmulla and Anantnag for manufacturing quality cricket bats
and the programme is monitored by Department of Botany (University of
Kashmir).
3.4.4 Operating levels of different clusters
India’s sports goods manufacturing operates at five levels:
i. First, there are the suppliers of prestige clients such as Adidas, Mitre
& Umbro, Gunn and Moore- bigger companies geared mainly to the
export market factories directly employ hundreds of people.
ii. Second, there are hundreds of small units- factories and workshops,
usually employing not more than a dozen workers each. These
produce mainly for the domestic market but also manufacture either to
order for the major exporters or for direct small-scale exports.
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iii. Third, there are the “middlemen” who goes between and employed by
the bigger companies to subcontract orders, especially in the
production of hand stitched inflatable balls. Their job is to collect
materials requiring for stitching from the factories, distribute them to
the small manufacturing units or to individual stitchers and return the
stitched items on completion.
iv. Fourth cog in the wheels are those individual stitchers themselves,
home workers employed mainly in inflatable ball production. Some
obtain their materials directly from factories, but most depends on
middlemen. Like the majority of workers in the industry, both the
middlemen and the home stitchers are paid by piece rate rater then
receiving a regular wage.
v. Fifth, there are service industries- the rubber and thread factories, the
rural tanneries supplying leather for cricket balls and gloves, the
Kashmiri saw mills supplying willow clefts for crafting into cricket
bats.
An attempt has been made to analyze the Indian sports goods
sector with the help of Strengths- Weaknesses- Opportunities and Threats
(SWOT) analysis as under:
3.5 Strength
Globally, the sports market is one of the most complex and diverse
markets in which the government, federations and private sector are intertwined
and all of them play an important role. In countries like China, Australia and
India, development of sports infrastructure is one of the key responsibilities of
the government. Government policies directly or indirectly impact the
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development of sports in any country. However, these policies vary from
country to country.
Prior to 1990’s, sports sector in China was completely government
funded, however, since then, there has been corporatization of sports. This has
helped in professionalization of sports and improving sports environment in
China. In India also the government has taken some steps in this direction.
3.5.1 Government initiatives
Recognizing the importance of sports, prior to the commencement
of the 9th Asian Games, a separate department was set up in 1982 by the
Government of India. Subsequently, the first National Sports Policy was
announced in 1984.
The Sports Authority of India (SAI) was established in 1984 as a
registered society in pursuance of a Government of India resolution. Its main
objectives include the effective and optimal utilization of various sports
facilities and all matters pertaining to sports promotion and sports management.
The Ministry of Human Resource Development (MHRD) was set
up in 1985, with the objective of integrating efforts for development of human
potential in the areas of Education, Women and Child Development, Arts and
Culture, Youth Affairs and Sports through its constituent departments. The
government has setup different institutions in this direction as under:
3.5.1.1 Institutional setups
Government has set different organizations to suggest policies and
programs for addressing the wide range of issues affecting the productive
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potential of the large segment of unorganized micro and small productive units.
India has taken several steps to improve the health of sports and fitness sector
by establishing the following agencies:
a. Small Industries Development Organization (SIDO)
Small Industry Development Organization (SIDO) was established
in 1954 to assist the government in formulating and implementing its policies/
programs/projects/schemes for MSME etc. The major activities of SIDO
include:
i. Provides techno- economic and managerial consultancy to MSMEs.
ii. Provides support for technology up-gradation, modernisation, quality
improvement and infrastructure facilities.
iii. Assisting the MSMEs in human resource development through training and
skill up-gradation.
iv. Maintains a close liaison with the central ministries, planning commission,
state governments, financial institutions and other organizations concerned
with the development of the MSMEs.
v. Provides testing and calibration services to the MSMEs.
b. National Small Industries Corporation Limited (NSIC)
The National Small Industries Corporation Ltd., (NSIC) was
established by the Government of India in 1955 as a public sector company with
a view to promote, aid and foster the growth of MSMEs in the country. NSIC
implements several schemes to help this segment in the areas of raw material
procurement, product marketing, credit rating, acquisition of technologies and
adoption of improved management practices, etc.
c. Entrepreneurship Development Institutes (EDI)
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Entrepreneurship development and training is one of the key
elements for the promotion of MSMEs. To undertake this task on regular basis,
the Government has set up different national-level Entrepreneurship
Development Institutes, viz National Institute of Small Industry Extension
Training (NISIET) at Hyderabad, National Institute of Entrepreneurship and
Small Business Development (NIESBD) at Noida and Indian Institute of
Entrepreneurship (IIE) at Guwahati, as autonomous societies.
d. National Commission for Enterprises in the Unorganized Sector
(NCEUS)
The National Commission for Enterprises in the Unorganized
Sector has been constituted in 2004 for a period of three years. The Commission
has been given the mandate to examine the problems of enterprises in the
unorganized sector and suggest measures to overcome them.
e. Ministry of Micro, Small and Medium Enterprises (MSME)
The Ministry of MSME was established by the Government of
India to implement “Micro, Small and Medium Enterprises Development
(MSMED) Act, 2006”, for Micro, Small and Medium Enterprises. Filing of
Memoranda, Measures for Promotion, Development and Enhancement of
Competitiveness of Micro, Small and Medium Enterprises, Credit Facilities,
Procurement preference and provisions related to delayed payments to these
enterprises were the main point of focus for the ministry. Most of the sports
good manufacturing units come under this category. Enterprises have been
classified broadly into two categories as:
i. Enterprises engaged in the manufacture/production of goods
pertaining to any industry;
ii. Enterprises engaged in providing/rendering of services.
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Enterprises can be categorized in terms of investment in plant and machinery/
equipment (excluding land and building) as below:
Table 3.2: Definition of Micro, Small and Medium Enterprises (MSME)
Category
Investment in plant and machinery/ equipment (excluding
land and building)
Manufacturing
Enterprises Service Enterprises
Micro Up to Rs. 25 lakh Up to Rs. 10 lakh
Small
More than Rs. 25 lakh and
up to Rs. 5 crore
More than Rs. 10 lakh and up
to Rs.2 crore
Medium More than Rs. 5 crore and
up to Rs. 10 crore
More than Rs. 2 crore and up
to Rs. 5 crore
Source: Dubey and Singh (2011)
f. Small Enterprise Information and Resource Centre Network (SEIRCN)
Small Enterprise Information and Resource Centre Network
launched in 1997 with the objectives:
i. To create and promote web based database of all relevant information and
data for the benefit of small scale sector.
ii. To facilitate easier on-line access to information seekers, especially the small
scale.
iii. To establish possible linkages with existing databases and the end
entrepreneurs for development and promotion of the small scale sector.
g. Process cum Product Development Centre (PPDC), Meerut
Process cum Product Development Centre (PPDC), Meerut was set
up during 1984 as a Government of India Society with United Nations
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Development Program (UNDP) assistance mainly to cater to the technical need
of sports goods industry in the country such as up gradation as well as
improvement in existing technology, quality control, in house R&D activities
and providing workshop and testing facilities.
h. World Trade Organization (WTO) Cell
A separate World Trade Organization (WTO) Cell was set up
during 1999 to coordinate the latest developments in regard to World Trade
Organization. The Cell maintains close liaison with other concerned Ministries
and Departments like Ministry of Commerce and Industry, Directorate General
of Foreign Trade, Directorate General of Anti-Dumping and Allied Duties, so as
to keep updated with regards to WTO Agreements whereby protects the
interests of small scale industries.
i. Sports Goods Export Promotion Council (SGEPC)
SGEPC, a Government of India sponsored organization, founded in
1958, for the promotion of exports of sports goods from India. The council
represents all the leading manufacturers and exporters of sports goods in India
and aims to:
Promotes export of sports goods from India
Authentication of exporters by providing a platform for the projection of
the industry at a national level
Provides the buyers with the list of the exporters as per their requirement
Arrange India pavilion in leading international fairs and forums for the
exhibitors
Stimulates and diversify the country’s export trade through Marketing
Development Assistance (MDA) and Market Access Initiatives (MAI)
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Schemes in collaboration with the Department of Commerce and
Industries (Government of India)
Supply of willow clefts from the State of J&K to cricket bat
manufacturers
Links between industry and government to channelize the National
Export- Import (EXIM) Policy for the sports goods sector;
j. Export Promotion Bureau (EPB)
The Export Promotion Bureau (EPB) helps the sports goods
industry in many ways as most of the production is being exported to many
countries. It helps the small manufacturers to collect their product in one
platform or the other so that they could export their product to other countries
on low prices.
3.5.1.2 Schemes
The government has initiated certain schemes to promote the
manufacturing and export segment of the sports goods industry as under:
a. Sub-contracting exchange for ancillary development
The sub contracting exchange maintains the requirements of
buyers, which could be products, components, subassemblies and services.
Under the existing scheme, Vendor Development Program (VDP) both at
national and state level is also conducted by Small Industries Service Institute.
b. Package for promotion of Micro and Small Enterprises (SME)
In order to promote the SMEs to yoke their potential by enhancing
their competitiveness both at the domestic and global market and availing the
opportunities generated by trade liberalization as legislative back up, credit
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support, fiscal measures, cluster based development, technological and quality
up-gradation support, marketing support, support for entrepreneurial and
managerial development, empowerment of women owned enterprises,
strengthening of Prime Minister’s Rozgar Yojna (PMRY) and strengthening of
data base for MSME sector.
c. Tool rooms and Training centers
The tool rooms have been set up to fulfill the tooling and training
needs of the small scale industries in the field of tool design, manufacture and
training of technical personnel in these fields. Government of India in
collaboration with different state governments has set up different tool rooms
with the objectives as mentioned under:
Advanced tool making process using CAD/ CAM/ CAE techniques
Provide training facility in tool manufacturing and tool design to generate a
work force of skilled workers, supervisors, engineers/ designers etc.
d. Certification Reimbursement Scheme (CRS)
In the process of economic liberalization and market reforms the
scheme provides incentive up to Rs. 75, 000 per unit, to SSI units which are
accredited with ISO-9000/ISO-14001 certifications.
e. Integrated Infrastructural Development Scheme (IIDS)
The Integrated Infrastructural Development (IID) aims at providing
basic infrastructural facilities like power distribution network, water, roads,
telecommunication, drainage and pollution control facility, banks, storage and
marketing outlets, common service facilities and technological back up services
etc., to enable establishment of small scale and tiny units, thereby creating
employment opportunities and increasing exports.
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f. Credit Guarantee Fund Scheme (CGFS) for small industries
Government of India introduced the CGFS for small industries in
year 2000 with the objective of making available credit to SSI units, particularly
tiny units, for loans up to Rs. 10 lakh without collateral/ third party guarantees.
The scheme is being operated by the Credit Guarantee Fund Trust (CGFT) for
small industries set up jointly by the Government of India and SIDBI.
g. Micro Finance Program/ Scheme (MFP)
Government of India has launched a revised scheme under Micro
Finance Program of SIDBI in 2003-04 by providing funds for NGOs.
h. Credit Linked Capital Subsidy Scheme (CLCSS)
The scheme aims at facilitating technology up gradation and
modernization of SSI units, including tiny and house hold industrial units for
their production equipment (plant and machinery) by providing upfront capital
subsidy.
i. International Cooperation Scheme (ICS)
ICS for modernization, technology up-gradation and
competitiveness enhancement of small enterprises has been under
implementation since 1996. Under this Scheme, small entrepreneurs are taken to
potential foreign markets, for firm/ association level interactions, or inter alia,
sourcing technology, exploring export markets of their products and learning
best practices.
3.5.1.3 Programs
Government has introduced many programs to improve the health
and competitiveness of sports goods industry of India as under:
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a. National Manufacturing Competitiveness Program (NMCP)
The government with an objective to support the manufacturing
sector has formulated of NMCP in 2005-06 for Lean manufacturing, Design
centers, Promotion of different quality techniques in manufacturing sector,
Setting up mini-tool rooms, Technology and quality management support for
SMEs, Entrepreneurial and management development of SMEs, Encouragement
of quality management standards and technology tools, National campaign for
investment in intellectual property, Technology up-gradation activities and
marketing support/assistance to SMEs and Implementation on PPP model etc.
b. Advertising and Publicity (A&P) programs for the promotion of SSI
The A&P program disseminates information about the government
policies and programs, incentives and facilities and institutional support
services, entrepreneurship development programs and skill development courses
available to MSMEs through local language newspapers in different parts of the
country.
c. Entrepreneurship Development Programs (EDPs)
EDPs are being organized as a regular training activity to the SME
representatives. The course contents of such Entrepreneurship Development
Programs are so designed so as to provide useful information on product/
process design, manufacturing practices involved, testing and quality control,
selection and usage of appropriate machinery and equipments, project profile
preparation, marketing avenues/techniques, product/service pricing, export
opportunities, infrastructure facilities available, financial and financial
institutions and cash flow etc.
d. Skill Development Programs (SDPs)
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Comprehensive training programs are organized to upgrade
existing skills and to create new skills in workers and technicians of SSIs by
organizing various technical training courses for them.
Emphasis has been given to organize specific tailor made programs
for the skill development of socially disadvantaged groups (OBC, SC, ST,
Minorities and women) in regions of the states including the less developed
areas.
e. Skill Development Program (SDP) in backward areas
In order to cater the specific requirements of disadvantaged groups
and backward areas, which face problems in traveling to urban centers for
attending these development programs, ORPSD are under consideration.
f. Management Development Programs (MDPs)
Management training course on various areas of industrial
management initiatives are also devised for owner-cum-manager and
supervisory level personnel of small scale industries.
g. Cluster Development Programs (CDP) for SSIs
CDP provides assistance to small scale units in the form as
mentioned under:
Soft areas: Encompasses activities like general awareness and trust building,
counseling, training and capacity building, exposure visits, credit facilitation
and market developments etc.
Hard areas: The components which are directed towards assisting
technology improvements and up gradation, quality standardization and
testing mainly in the form of Common Facility Centers (CFCs).
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3.5.1.4 Awards and Honours
The Government of India honors the entrepreneurs for their
outstanding contribution in the promotion of different sports through their
business activities as National Award to small scale entrepreneurs, for quality
products and for Research & Development of new products.
3.5.2 Availability of skilled labour
According to National Productivity Council Report (2010), both
skilled and unskilled work force is increasing from financial year 2004-05 to
financial year 2008-09 across the manufacturing units as shown in Table 3.3.
Table 3.3: Skilled and unskilled labour across manufacturing units
Years Skilled labour (Percent) Unskilled labour (Percent)
2004-05 60 40
2005-06 58 42
2006-07 59 41
2007-08 58 42
2008-09 59 41
Source: National Productivity Council Report (2010)
Figure 3.1: Skilled versus unskilled labour
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Only a few well organized manufacturing units are employing
more than 500 workers while other small unorganized manufacturing units are
still managing with 8 to 10 workers. In general, 60 percent of the workforce is
skilled while 40 percent is unskilled in the sector.
3.5.3 Productivity growth
One of the important characteristics of the sports goods sector is
that it is a fast growing sector and contributes immensely to employment
generation in India. Indian sports goods industry enjoys advantages in terms of
labour productivity and prevailing low wage rates. Labour productivity is one of
the major factors that determine overall competitiveness of the sector. Industry
has a dualistic structure. The main pillars are the quality and the availability of
skilled traditional labour. Among these pillars, the handmade product occupies a
dominant position.
The organized factory sector occupies an important position in the
entire scenario of the sports goods production. Though it does not occupy the
top most position, its importance cannot be under estimated from the structural
point of view. Moreover, the developments in the organized sector can be easily
measured and the implications of government policy both domestic and global
are easily assessed since the time series data pertaining to this sector are
available through different reports. Hence, considering these factors an attempt
has been made to study the productivity performance of the organized factory
sector the sports goods industry in India.
Table 3.4: Productivity estimates for labour and capital inputs
Year Capital Productivity
(Earning per Re. invested)
Labour Productivity
(Rs. per person employed)
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1995-96 1.26 90167
1996-97 0.91 87030
1997-98 0.79 58200
1998-99 0.89 79371
1999-2000 0.95 98847
2000-01 0.43 83345
2001- 02 0.52 84594
2002-03 1.01 58972
2003-04 1.05 67889
2004-05 1.48 63789
2005-06 2.06 60333
2006-07 1.18 48064
2007-08 1.05 56208
2008-09 0.89 62063
Source: National Productivity Council Report (2010)
0
0.5
1
1.5
2
2.5
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
Figure 3.2: Capital Productivity
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0
20000
40000
60000
80000
100000
120000
1995-96
1996-97
1997-98
1998-99
1999-2000
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
2008-09
Figure 3.3: Labour Productivity
The declination in labour productivity (as compare to past years) in
labour intensive sector of sports goods seemed inevitable due to the inclusion of
new and sophisticated technologies in production processes, which are more
capital intensive. It has serious implications for employment in a country like
India with limited resources, spending more on capital which yields declining
productivity not only limits employment but also lower labour productivity.
3.5.4 Export competitiveness
Indian sports goods industry has been responding well to
international challenges over the years; hence a bright future ahead is
anticipated.
It is not hypothetic to say that the sector is maintaining global
standard and can compete for all range of sports products. Despite global
recession, the industry has been able to achieve a remarkable growth.
According to National Productivity Council Report (2010), of the
twenty main items exported from India, fourteen items registered positive
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growth in their exports from India (refer Table 3.5). Hammocks recorded the
highest annual growth (24.33 percent) while Rackets recorded the lowest annual
growth (-34.79 percent) during 2002-03 to 2008-09. The largest exported items
in sports goods sector remains inflatable balls with a share of almost 30 percent
of total exports of sports goods.
Table 3.5: India’s export of major sports goods (Crore Rs.)
Items of Export 2002-03 2005-06 2008-09 CAGR (%)
Inflatable balls 124.70 168.85 170.28 5.33
Hammocks 14.91 26.46 54.81 24.23
Cricket bats 24.00 35.14 44.60 10.88
Boxing Equipments 25.18 31.28 38.37 7.27
General Exercise
Equipment 12.52 22.44 38.31 20.49
Protective Equipments for
Cricket 30.29 34.16 35.34 2.60
Golf Balls 15.87 13.63 26.58 8.98
Toys and Games 5.86 8.04 19.07 21.73
Nets 0.00 6.94 14.47 14.82
Carrom Board and Chess 8.78 6.37 11.88 5.17
Cricket and Hockey Balls 6.53 8.64 11.15 9.33
Table Tennis Equipment 3.71 7.12 10.95 19.77
Protective Equipment for
Football - 8.65 10.60 -0.28
Bladders 5.56 6.97 9.35 9.05
49
Fishing Equipment 7.33 5.73 7.36 0.07
Protective Equipment for
Hockey 2.55 3.11 3.22 3.96
Hockey Sticks 4.20 3.15 1.74 -13.66
Sports Badges and
Insignias 0.13 0.52 0.44 22.53
Racket 0.13 0.13 0.01 -34.79
Other Sports goods 25.94 59.65 78.36 20.23
Total 318.19 456.98 586.89 10.74
Source: Sports Goods Export Promotion Council (2009)
Figure 3.4: CAGR (Percent) from 2002- 03 to 2008-09
The export destinations of Indian sports goods have increased from
127 countries in 2007-08 to 137 countries in 2008-09. Some of them are
mentioned in Table 3.6.
50
Table 3.6: Sports goods export to different countries (Crore Rs.)
Country 2004-05 2005-06 2006-07 2007-08
2008-09
CAGR
Australia 65.15 61.16 82.86 78.04 83.17 6.29
Canada 9.77 8.89 12.13 9.26 9.64 -0.36
France 14.87 17.35 20.49 29.06 22.51 10.92
Germany 17.26 34.08 21.74 27.09 25.16 9.87
Ireland 5.10 7.23 6.56 9.04 10.71 20.40
Italy 16.58 15.01 12.34 10.47 7.99 -16.69
Newzealan
d 8.41 14.81 8.73 11.83 11.40 7.92
S. Africa 16.00 18.95 29.67 26.55 25.24 12.07
UK 124.77 130.58 150.78 154.74 150.29 4.76
USA 52.04 64.52 81.41 78.01 132.84 26.40
Other
Country 65.15 84.39 82.35 85.17 107.94 13.45
Total 395.11 456.97 509.04 519.26 586.89 10.40
Source: Sports Goods Export Promotion Council (2009)
Figure 3.5: Country wise CAGR (2004-09)
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3.5.5 Growing young and urbanized middle class
According to Federation of Sports and Play Association Report
(2011), more than 1.2 billion people live in India and nearly half of them have
less than 25 years of age. The development of the sports market is being partly
fostered by the fact that the new generations are becoming increasingly urban,
educated and affluent. It is estimated that the country’s urban population will
soar to about 590 million people by 2030. Some economists predict that, based
on the youth of its population and the stimulant of democracy, among Other
Factors, India’s economic growth could lastingly outpace China’s in a few years
time.
3.5.6 Weak but continuous sports participation
Unfortunately, only a small proportion of Indians practice sports,
mainly due to low disposable income and the shortage of adequate sports
facilities. It is quite significant to highlight, on the basis of some consumer
researches that many people are interested in purchasing sports clothing and
sports shoes if they have the money, even if they don’t practice sports. Growing
disposable income and shifts in lifestyles, particularly in urban India, have also
begun to change people’s leisure habits and promoting more physical exercise,
particularly through running and membership in fitness clubs.
3.5.7 Continuous development
Sports goods industry, after globalization, is developing
continuously and has moulded itself to meet future demands by innovating new
products for new markets, as shown in Table 3.7.
52
Table 3.7: Annual turnover of the cluster (Lakhs Rs.)
Year Total
2004-05 34807
2005-06 38991
2006-07 48064
2007-08 56208
2008-09 62063
2009-10 57098
Source: National Productivity Council Report (2010)
Figure 3.6: Development of the cluster
Table 3.8: Segment wise annual turn over
Annual turn over based segments Total Enterprises (percent)
Less than 10 Lakhs 21.54
10 - 30 Lakhs 26.92
30 - 50 Lakhs 39.23
50 – 70 Lakhs 7.69
70 Lakhs to above 4.62
Source: Dubey and Singh (2011)
53
Figure 3.7: Segment wise annual turnover
Today, Indian sports goods manufacturers are also exporting
products under their own brand names, in addition to being original equipment
manufacturers (OEM) suppliers for international sports brands. India’s share of
the global sports goods exports market is expected to grow manifold, with the
country establishing the credibility of its goods in the global market. The export
share of sports goods from India in the last five years are as under:
Table 3.9: Year wise earning of foreign currency
S. No. Financial Year Export (Crore Rs.)
1 2005-06 456.97
2 2006-07 509.04
3 2007-08 519.26
4 2008-09 586.89
5 2009-10 540.00
Source: MSME Annual Report and SGEPC Reports (2010)
54
Figure 3.8: Year wise earning of foreign currency (Crore Rs.)
As mentioned in Figure 3.5 it is clear that USA is the largest
consumption avenue of sports goods in the world. Hence strive has been made
to compare the export status of different sports goods exporting countries by
taking USA as a reference destination (as mentioned in Table 3.10).
Table 3.10: Export (to USA) comparison
S.
No Countries 2004 2005 2006 2007 2008 2009
1 China 25084501 26179882 32395627 32901199 36603669 31108439
2 Pakistan 16434130 16324885 20364242 14869219 15335329 11623939
3 India 1009428 1658677 2877121 1441292 2266025 1443765
4 Thailand 370172 710654 1394845 1629041 1357368 607108
Source: U.S. Department of Commerce and Industry (2010)
55
Figure 3.9: Export comparison
In recent years, Indian products have been exported for global
sports events such as the Football World Cup- 2002, where India manufactured
bladders were used. Athletic boxing equipments made in India were also used at
the Atlanta Olympics-1996 and Beijing Olympics- 2008.
3.5.7 Other factors
Other Factors which are add-ons’ to the existing ones are:
i. More than 100 years old industry with strong base of traditionally skilled
man power
ii. Availability of most of the raw materials
iii. Abundant human resources at comparatively lower wages
iv. Emergence of India on global manufacturing scene
v. Low overheads due to small scale production
vi. Business acumen of entrepreneurs
vii. Manufacturing industry network and linkages
viii. Capacity to operate under adverse conditions
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3.6 Weaknesses
Apart from the strengths, as mentioned in the previous section, the
industry is also confronted with number of problems, constraints, handling
hazards, limitations and rigidities as under:
3.6.1 Poor sports policy
According to the report of the Working Group on Sports and
Physical Education for 11th Five Year Plan (2007-12) of Planning Commission;
under the Constitution of India, ‘Sports’ figures at Entry No. 33 in List II (i.e.
State List) of the Seventh Schedule of the Constitution under “Theatres and
Dramatic Performances; Cinemas subject to the provisions of Entry 60 of List I;
Sports, Entertainments and Amusements”. It appears from this that in a system
sense, the whole subject of sports is still seen in a very limited manner and
context. The Sports Policy states that the objective of broad-basing sports
primarily remain the responsibility of the states and the central government. At
yet, another level, a third set of key stakeholders, viz., the National Sports
Federations, are neither within the jurisdiction of the states, nor has any
effective and meaningful regulation in a systematic manner been possible from
the central level, since “Sports” is a state subject.
3.6.2 Confusing ministerial structure
According to the study conducted by Mukherjee (2010), at the
manufacturing and retailing end, there is no single ministry governing sports
goods sector. Sports equipment falls under the aegis of the Ministry of
Commerce and Industry while sports apparel is under the Ministry of Textile
along with textile, apparel, home furnishing, etc.
57
Retail, on the other hand, is a state subject according to the Indian
Constitution and, therefore, state governments are the main regulatory authority.
There is no nodal ministry to regulate retail trade at the centre unlike other
sectors like agriculture which are also subject of state legislation. Different
segments of the retail business are regulated by different ministries.
3.6.3 Weak R&D
The Research and Development (R&D) in sports goods segment is
really in the bad shape. No dedicated research center is established by the
competent bodies to evolve the new techniques which could help out different
sports goods clusters for up gradation of existing technologies, materials and
human resources development, manpower planning, market development,
equipment problem and other technical assistance etc.
3.6.4 Poor cluster development
The overall development of sports goods cluster and promotion of
excellence, including performance at the international level, is highly complex
and multi-dimensional subject and there are many stakeholders and
components, needing to be woven into an integrated system of clearly identified
activities, roles and responsibilities of the key players, on the one hand, and
systematically putting in place the requisite facilities and support systems and
processes, on the other. Yet, the desired results have not been achieved.
3.6.5 Improper availability of raw material
There has been a decrease in availability of many of the materials
needed for craft manufacture and a decline in quality in many of the still
available materials. The sports goods industry facing the most severe shortage
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today is wood, cane, scrap and virgin metal. The costs of some of these are
rising at a pace.
3.6.6 Lack of availability of finance
Most of the small business entrepreneurs depend on traditional
sources of finance such as personal or family sources or local moneylenders.
Credit available through financial institutions is either availed by large
entrepreneurs and the smaller ones are deprived of it due to illiteracy, lack of
awareness, rector procedure required for obtaining loans or due to local petty
politicking.
3.6.7 Erratic power supply
The cluster also faces the problem of the erratic supply of power.
In many towns and villages, the availability of electricity is poor. So, the cottage
industries, located in the rural areas, have no option other than to use manpower
to its optimum level and produce the commodities .Thus, the cost of production
increases and at the same time, they are unable to sell their products at a
nominal profit rather.
3.6.8 Poor transportation facilities
The cluster faces the problem of poor transport facilities.
Development of transportation is inadequate. In many towns and villages, there
are no proper roads to transport the output of the industry. The cost of transport
also results in an increase in prices. Hence, the products are sold in local areas at
low price but comparatively high cost, which results in squeeze of profit
margins.
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3.6.9 Infrastructural inadequacies
According to the survey conducted by National Productivity
Council (2010) among the sports goods entrepreneurs, the following outcome
had been realized:
Figure 3.10: Availability and quality of basic infrastructure
It is clear from the Figure 3.10 that most of the entrepreneurs are
not satisfied with the quality of basic infrastructure of the cluster. It is due to the
facts absence of design centers, evaluation and demonstration facilities, lack of
services and feasibility studies, poor assistance for pilot plant trials, inadequate
testing facilities, high cost of maintenance, environment cleanliness including
effluent treatment and disposal facilities, absence of common facilities, non-
availability of developed tool rooms and standards for ensuring quality and
accuracy of the work/ product and proper storage and handling facilities etc.
3.6.10 Other factors
The Other Factors affecting the sports goods clusters are:
i. Manpower development related problems
ii. Quality related problems
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iii. Marketing and sales promotion related problems
iv. Most of the industry is in tiny sector
v. Low volume of production
vi. Low mechanization in the MSME industry
vii. Higher production cost due to low scale of production
These weaknesses have made Indian sports goods industry a very
tiny player in the international market as it can neither supply bulk orders nor
assure high-quality of products.
3.7 Opportunities
Rather, many factors that affect the performance of sports goods
clusters are lying down still if given the right opportunity, the cluster can
flourish. Some of the opportunities that Indian sports goods cluster can avail are
as follows:
3.7.1 Increase in product demand
The field survey conducted by Dubey and Singh (2011) claims that
badminton; shooting; table tennis; wrestling and boxing related equipments
would be in high demand and confirm it by the Table 3.12 (mentioned under).
Table 3.11: Extant of demand for sports goods
Characteristic Manufacturers opinion (percent)
Increase 60.77
Decrease 5.38
Stagnating 20.00
Constant 13.85
Source: Dubey and Singh (2011)
61
Figure 3.11: Demand of sports goods products
3.7.2 Commonwealth Games- 2010
“Come Lets Play”, with this message, India set to host a sports
mega event of its kind after nearly thirty years, with the hope to propel itself
onto the world stage as an economic superpower, along with promoting sports
culture in the country as a whole. India’s successful bid to host the nineteenth
Commonwealth Games in 2010 marked a chance for the South Asian giant to
showcase its rapid growth and development to the world.
The games had attracted millions of tourists from around the globe,
in addition to approximately 10,000 athletes from 54 Commonwealth member
states, to New Delhi. In preparation, the Indian government has allocated a
generous budget of well over US$1.6 billion, the largest yet for the
Commonwealth Games (CWG). Clearly, the CWG, which is the third high
profile sporting event after Olympics and World Cup, held in India since it
hosted the Asian Games in 1982, had been viewed by the Indian establishment
as a chance to signal its coming of age as an economic and regional power. This
is especially true coming on the heels of Beijing's Olympic success in 2008 and
South Africa's success with the Fédération Internationale de Football
Association (FIFA) Soccer World Cup in June and July 2010. Developed
62
infrastructure, employment opportunities, economic investment in the region,
transportation and road network, sports legacy in the country, volunteering
culture, tourism industry, business opportunities, skill development and
education, image of the country, cultural legacy and national fervor are some of
the impacts expected from this mega event.
Table 3.12: Cost and Benefit analysis of mega events on economy
Games Phases Benefits Costs
Pre-Games Phase Tourism
Construction Activity
Investment Expenditure
Preparatory operational
costs (including bid costs)
Lost benefits from
displaced projects
Games Phase Tourism
Stadium and
Infrastructure
Jobs
Revenues from Games
(tickets, TV rights,
sponsorships, etc.)
Operational Expenditure
associated with Games
Congestion
Lost benefits from
displaced projects
Post-Games Phase Tourism
Stadiums and
infrastructure
Human Capital
Urban regeneration
International
Reputation
Maintenance of Stadiums
and infrastructure
Lost benefits from
displaced projects
Source: European Economic Outlook (2004)
63
3.7.3 Cricket World Cup- 2011 and other mega events
The mega events of either nature also provide a unique opportunity
which attracts visitors both from within the host country and around the globe.
Visitors linked directly to the event including participants (athletes, coaches and
team officials), spectators, sponsors and the media.
3.7.4 Technology up- gradation
There is lot of opportunities for sports goods industry in up
gradation of existing technology. The import of upgraded technology can be the
form of Foreign Direct Investment (FDI), collaborations and purchase of
technology etc. Mega events are one of the major avenues for the identification
of latest technology up gradation adopted by the pioneer manufacturing houses.
3.7.5 Increasing investment
The high technology but non- conventional products like fitness
equipments, golf equipments and bowling alley equipments etc. are some of the
avenues which offers good return on the investment hence capital investment in
these segments are increasing as per their demand in the global market. The
Table 3.14 gives the clear picture:
Table 3.13: Capital investment of manufacturing units
Years Investment (Lakh Rs.) Growth Rate (Percent)
2004-05 2911 -
2005-06 2922 0.37
2006-07 3269 11.87
2007-08 4266 30.50
2008-09 5563 30.40
Source: National Productivity Council Report (2010)
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3.7.6 Contributes to employment enhancement
Sports Goods sector is labour-intensive and contributes
significantly to employment enhancement- both direct and indirect. For
instance, most of the developed countries use automated manufacturing
facilities still they offer a large number of employment as mentioned under:
In Hong Kong in the year 2000 sports-related activities directly employed
approximately 61,300 persons which is 1.9 percent of total employment.
In the European Union (EU) in 2005 about 15 million people were
employed in the sports industry, representing over 5 percent of the total
labour market.
In United Kingdom (UK) in 2005 the sports industry employed 2 percent
of the total workforce (around 576,000 people). However, the bulk of the
employment in this sector is seasonal, part-time or voluntary.
In the United States (US) in 2008 approximately 1.5 million people were
employed directly in amusement, gambling and recreation sectors and
about 50,200 were working in wholesale trade of sporting goods and
244,600 in retail stores of sporting goods.
The potential for employment generation of the labour intensive
sectors thus becomes an important research focus.
3.7.7 Linkages with other sectors
The sports goods sector has strong inter-linkages with other sectors
and has multiplier effects of development and the economy as a whole. The
different sectors can be identified as under:
Media: In many countries there are dedicated sports channels and sports
magazines which have increased the market for sports broadcasting as
well as television advertisements and promotions by sportsperson.
65
Tourism: Many countries are trying to promote their tourism sector
through sports. For instance, Malaysia is developing as a golfing
destination where as Switzerland for skiing.
Fashion Industry: Renowned fashion designers are now associated with
the big names such as Reebok’s “Reebok Rolland Berry” shoes are
designed by the well-known designer Rolland Berry (US); English
fashion designer Stella McCartney has launched a joint venture line with
Adidas - "Adidas by Stella McCartney", which is a sports performance
collection for women etc., are the main factors that transforms the
conventional industry into the most demanding destination.
3.7.8 Reformed government policies
Reformed government policies can help to promote sports and
create demand for sports products. Apart from the initiatives, as discussed in the
previous sections, taken by the government, following mentioned points can
largely be considered as an opportunity for the sports goods cluster of India:
3.7.8.1 National Sports Policy
In 2007, a comprehensive National Sports Policy (NSP) was
announced to develop a sound framework for sports in the country. The policy
emphasized on the development of sports infrastructure, making sports and
physical education an integral part of students’ curriculum, to broad-base sports
and achieve excellence in sports at national and international levels and
development of sports in rural areas on priority. These measures would
definitely go far and provide an opportunity to improve the health of sports
culture and the related clusters of the country.
3.7.8.2 Promotion of sports at school/ college level
66
Time to time, the government is also introducing different schemes
to promote sports and games in school and colleges, developing infrastructure in
rural schools, training people and mobilizing resources as:
National Sports Talent Contest Scheme in 1985 to give scientific training
to talented young children in the age group of 14-18 years.
“Panchayat Yuva Krida Aur Khel Abhiyan” during the Eleventh Five
Year Plan (2007-12) under which a grant of Rs. 40 million has been
allocated to the Ministry of Youth and Sports Affairs for the promotion of
sports and games in schools, colleges and universities in the year 2010-
11.
This could provide an opportunity for the budding sportsmen to
cherish their talent at national as well as international level. The young
entrepreneurs can also be privileged by these schemes and get an opportunity to
heighten their business and hidden potential.
3.7.8.3 Policies related to Foreign Direct Investment (FDI)
Some reports viewed that Indians spend a lot on international trips.
FDI aims to give consumers access to a wide range of foreign brands and
international shopping experience within India. It can benefit both the foreign
retailers and the Indian partners. On one hand, foreign players get local market
knowledge and on the other, the Indian companies can get access to global best
management practices, designs and technological know-how through such
partnerships.
3.7.8.4 Sports goods sector as a priority concern
The sports goods and toys sector has a special focus in the Foreign
Trade Policy (2009-14) and is treated as a priority sector under the Marketing
67
Development Assistance (MDA) and the Market Access Initiative (MAI)
schemes. There are duty exemptions on the import of footwear machinery and
concessions have been given to the import of sports vehicles, such as golf carts
for hotels, travel agents and tour operators to promote the tourism industry in
general and golf tourism, in particular.
Apart from these, the Foreign Trade Policy (FTP) emphasized on
the promotion of Indian brands in international markets, simplification of the
procedures for imports/exports, improvements in infrastructure related to
exports and reduction in transaction costs.
3.7.8.5 Contingency measures
When the Indian exporters were hit by the global slowdown the
government announced stimulus packages to revive the sector. Different state
governments also provide incentives to promote manufacturing and assist the
sports industry in their states.
3.7.8.6 Sports goods retailing
Sports retailing is a niche segment of retailing which involves the
retail sales of sports equipment, apparel, shoes and accessories. According to an
estimate, the total size of the Indian retail market was US$372 billion in 2008.
Different studies pointed out that sports retailing constitutes a very small part of
this market (around 2.7 percent) but its share in organized retailing is high
(around 10 percent).
Sports retailers are operating in India through various formats.
Franchisee is the most common mode of operation for branded retailers such as
Reebok, Adidas, and Puma etc. It helps them to increase their retail footprints.
68
Corporate retailers simultaneously operate through exclusive brand outlets,
shop-in-shop with department stores/multi-brand retailers, factory outlets and
discount stores among others. Now a days departmental stores are increasingly
setting up separate sections for health and fitness, which provides opportunities
for sports brands to display their products.
Bulk of the corporate retailers concentrate in large cities but
established players such as Reebok and Adidas are now penetrating into Tier II
and Tier III cities, while relatively new players, like Lotto, are planning to
expand beyond metropolitan cities. These companies have designed right-
pricing policies, for which they saw an increase in sales of over 70 percent in
semi-urban areas.
Table 3.14: Opportunities for sports goods retailing
Retailing models Cities
Mature and Transitional Delhi/NCR, Mumbai, Bangalore, Kolkata,
Hyderabad, Chennai, Pune and Ahmedabad
High-growth cities and
growing opportunity
Chandigarh, Ludhiana, Jaipur, Lucknow, Kochi,
Vadodara and Surat
New and Emerging
Indore, Amritsar, Jalandhar, Nasik,
Bhubaneshwar, Agra, Coimbatore, Kanpur,
Nagpur and Goa
Nascent Jodhpur, Patna, Rajkot and Aurangabad
Source: Mukherjee (2010)
3.7.9 Other factors
Other Factors by which the sports goods sector is largely privileged
are:
69
i. Large and expanding domestic market
ii. Increase in demand due to rise in the disposable income of domestic
consumer
iii. Growing confidence, of both domestic and international buyers, on the
Indian sports goods
iv. People are more health conscious now than ever
v. Achievements of Indian sports persons increasing the awareness and
popularity of sports in India
vi. Overseas buyers are looking for alternate source of supply instead of heavy
dependence on one country
3.8 Threats
Although India has improved a lot in manufacturing sector, over
the period of time, still sports goods sector is estimated as the niche segment
and facing several threats on international and domestic fronts as under:
3.8.1 Threats at international level
Despite, achieving significant growth in exports, India contributes
just 1 percent to the global market in sports goods sector. On the other hand,
India’s import of articles and equipments for sports is an alarming factor for
Indian sports goods industry. The sports goods import from China and Taiwan
are increasing at a rapid pace followed by USA and other EU countries.
The threat for the Indian industry in the international market is
from Pakistan, China and Taiwan. Pakistan based sports goods industry, on one
hand, are labour intensive but they supply the quality products. China and
Taiwan, on the other hand, do not have traditional labour but the bigger source
of threat is their high production capacity at the cheaper price tags due to high
70
mechanization. The Indian sports goods industry is labour intensive, cannot
meet large scale demand of world market and face the productivity and
competitiveness threats.
3.8.2 Government’s reliability on foreign brands
The government and different sports federations are the major
buyer of sports goods in India but their inclination towards foreign brands
would be a threat for domestic manufacturers.
Sports goods imported by the government are exempt from import
and other duties. With the advent of corporate retailers/ big brands, many of
them directly work with government and /or federations. For instance, Nike is
the official kit sponsor for the Indian cricket team for five years, from 2006 till
end of 2010. This cut down the benefits of Indian sports goods manufacturers.
3.8.3 Taxation
National Productivity Council (2010) conducted a survey among
the sports goods entrepreneurs, which reported that the taxation scenario is
really disappointing and can be better dictated by the table 3.17, as mentioned
under:
Table 3.15: Taxation
Tax laws Opinion (Percentage)
Very High 64
High 16
Moderate 7
Low 13
Source: National Productivity Council (2010)
71
Moderate7%
Low13%
High16% Very High
64%
Figure 3.12: Perception regarding taxation
3.8.4 Penetration of global brands
Some studies highlighted that multi-brand retailers like ‘Planet
Sports’ and brand retailers like Nike and Reebok have focused on school
children as a big market for sports products. They are working with the mindset
that if they like a brand, it will stay with them throughout their life. Brands have
come up with competitive pricing strategies to get business from this segment.
3.8.5 High logistic cost
In India, the logistic chain is highly fragmented and is marked by
the presence of a large number of intermittent. Delay in transportation,
requirement for multiple documentations at state borders increases the costs of
inventory management. A Planning Commission estimate shows that logistics
costs in India as a percentage of GDP increased from 13.41 percent in 1999-
2000 to 14.97 percent in 2005-06. This implies that India spends approximately
US$30-40 billion more than it should on logistics due to inefficiencies in the
system. It also estimated that approximately 14 percent of a product's cost
represents logistics-related costs.
72
3.8.6 Poor availability and storage facility of raw material
Import barriers such as delays and cumbersome custom clearance
process, inadequate warehousing facilities at airports, bribes and corruption can
also be considered as the threat for Indian sports goods sector.
Sudden and unplanned shortage of raw materials can lead to non-
availability of goods at the retail end. For instance, after the bird flu in China,
the Indian Government banned the import of feathers which adversely affected
shuttlecock production and supply. Willow is used for high-quality cricket bats
and it is mainly procured from Kashmir and the United Kingdom; Kashmir has
now banned the sale of raw willow outside the state.
3.8.7 Stringent labour laws
Most of the units in sports goods sector are small and medium
enterprises having limited production capacities. They are unable to serve the
requirement of buyers in case of large order to be delivered in a time bound
manner. Since such orders are not regular, manufacturers are wary of increasing
their capacities due to stringent labour laws.
3.8.8 Poor marketing practices
In the small scale industry one of the most important obstacles of
development is the existing system of distribution and marketing of products.
Presence of middlemen as the intermediaries is problematic, especially for tiny
business entrepreneurs. Inadequate market awareness is another problem faced
by the small industrial entrepreneurs, which reduces the foreign exchange
earning capacity of the industry.
On the other hand, exporters, one of the prime factors of foreign
73
currency, complained about the difficulty of obtaining credit, procedural
complexities, inefficiencies and corruption in government department as a
perennial problems. According to National Productivity Council (2010), with
the lowering of tariff barriers, Indian market is now open and the industry is
facing the challenges of cheaper but quality oriented foreign products.
3.8.9 Declining growth of units
Despite the growth potential, entrepreneurs could not plan to
expand their businesses due to bottleneck in industrial growth. The basic
problem and factors for unsuccessful growth of the industry is shown in Table
3.18. Low returns, market competition, low investment, lack of finance, limited
demand and inferior quality of products etc. are some of the important factors
for declining growth of sports goods industry in India.
Table 3.16: Factors that lead to declination in growth of units
S. No. Factors Felt by Industry (Percent)
1 Lack of finance 44.62
2 Limited demand of products 13.08
3 Low investment 29.23
4 Low returns 56.92
5 Inferior quality of products 6.92
6 Competition in marketing 100.00
7 Limited product demand 9.23
8 Any other 85.38
Source: Dubey and Singh (2011)
74
Figure 3.13: Factors affecting the growth of SGI
3.8.10 Impact of recession
Global recession strikes the world and impact adversely in 2007-
08. No segment left untouched and so the sports goods industry of India. The
industry faced a remarkable melt down of the market as shown in the table 3.17,
mentioned below:
Table 3.17: Impact of recession on annual turnover (Lakhs Rupees)
Year Total
2004-05 34807
2005-06 38991
2006-07 48064
2007-08 56208
2008-09 62063
2009-10 57098
Source: National Productivity Council (2010)
75
Figure 3.14: Impact of global recession on annual turnover
Table 3.18: Year wise earning of foreign currency
S. No. Financial Year Export (Crores)
1 2005-06 456.97
2 2006-07 509.04
3 2007-08 519.26
4 2008-09 586.89
5 2009-10 540.00
Source: MSME Annual Report and SGEPC Reports, 2010
Figure 3.15: Year wise earning of foreign currency (Crore Rs.)
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3.8.11 Alarming growth rate
According to National Productivity Council Report (2010), the
average turnover of sports goods industry has increased from Rs.34807 Lakhs in
2004-05 to Rs.62063 Lakhs in 2008-09 at a CAGR of 14.80 percent.
Table 3.19: Annual growth rate
Years Turnover (Lakh Rs.) Growth Rate (Percent)
2004-05 34807 -
2005-06 38991 12.02
2006-07 48063 23.26
2007-08 56208 14.50
2008-09 62063 9.43
2009-10 57098 7.80
Source: National Productivity Council Report (2010)
Figure 3.16: Yearwise annual growth rate
3.8.12 Other factors
The Other Factors that effect the health of Indian sports goods
industry are:
77
i. Low consciousness on international safety and quality standards
ii. Introduction of high tech materials (Graphite and composites etc.) by
international manufacturers
iii. International brands gaining popularity in India
iv. Least awareness of latest technology and tools
v. Costly technology and tools are costly not easily available
vi. Market is vast and targeted only for low and lower middle income groups.
vii. Breakage of raw material in transportation
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Chapter 4 Sports Goods Industry in Meerut
4.1 Introduction
Meerut is an ancient city, located 56 km (34 miles) north-east of
New Delhi and the administrative headquarters of the Meerut Division
consisting of the districts of Meerut, Bulandshahar, Gautam Buddha Nagar,
Ghaziabad and Baghpat.
It is a city and a municipal corporation in the state of Uttar
Pradesh. It is not only the 16th largest metropolitan area but also the 25th largest
city in India, ranked 292 in 2006 and 242 in 2010 in the list of largest cities and
urban areas in the world. It is the fastest developing city of Uttar Pradesh after
Noida and Ghaziabad, spread about 172 square km area. The total metropolitan
area is 198 km which is third in Uttar Pradesh after Lucknow and Kanpur.
Meerut also has one of the major army garrisons.
Meerut district consists of 1,025 villages with a population of
around 3.44 million according to the 2011 census. Meerut has an average
literacy rate of 74.80 percent, marginally higher than the national average of
74.04 percent with male literacy at 82.91 percent and female literacy at 65.69
percent. Meerut has one of the largest Muslim populations among the major
cities of India (close to 45percent). There is also a significant Christian
population.
4.1.1 Climate
Meerut has very hot summers and very cold winters. Temperature
in summers reaches upto 48 degree celsius on contrary lowest temperature