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Profitability Analysis of Indian Readymade Garment Industry

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Title Profitability Analysis of Indian Readymade Garment Industry
 
Creator Mahor, Nirbhay
Banerji, Amit
 
Subject ARDL cointegration
Cash conversion cycle
Fixed assets turnover
Physical capital intensity
Profitability
 
Description 888-896
India is among the world’s largest producers and exporters of textiles and Ready-Made Garments (RMG). This research aims to
establish a causal association between Return on Assets (ROA) and key operational metrics such as the cash conversion cycle, fixed
asset turnover, and physical capital intensity, to investigate their influence on the profitability of the Indian RMG industry. The
Auto Regressive Distributed Lag (ARDL) cointegration is applied to study impact on profitability. This study identifies a long-term
relationship between profitability metrics, such as ROA, and operational factors including sales, fixed asset investments, and
Working Capital Management (WCM) strategies, utilizing data from CMIE Prowess spanning from 1988–89 to 2018–19. The
results suggest that (i) decreasing physical capital utilization in generating sales, leading to reduced profitability, and (ii)
lengthening of the trade cycle increasing profitability, albeit with diminishing returns. Porter’s Diamond model for national
competitive advantage in RMG is proposed. The empirical results highlight, the importance of enhancing technology in fixed
assets, optimal management of the cash conversion cycle, and debt management.
 
Date 2024-08-12T10:14:08Z
2024-08-12T10:14:08Z
2024-08
 
Type Article
 
Identifier 0022-4456 (Print); 0975-1084 (Online)
http://nopr.niscpr.res.in/handle/123456789/64402
https://doi.org/10.56042/jsir.v83i8.6028
 
Language en
 
Publisher NIScPR-CSIR,India
 
Source JSIR Vol.83(8) [August 2024]