After a couple of years of challenging times, the readymade garments industry has reasons to cheer now. Demand has revived both in the overseas and domestic markets giving a fillip to garment production and exports during the last eight months.
However, what is more significant than the revival in exports is the fact that several factors are favourable to the Indian garments industry now and these can be leveraged to increase India’s share in the global apparel market.
Second opportunity Some in the industry are of the view that this is a second opportunity for the garments industry to increase its global presence substantially.
In 2005-06, when the quota restrictions made by the multi fibre agreement were completely phased out, India’s apparel exports grew 32 per cent over the previous year.
The country had about 2.8 per cent share in the global apparel trade then. The years after that had not go well for the garment exporters for several reasons.
In the last eight years, India’s share in the global apparel trade has increased to just 3.2 per cent. Countries such as China, Bangladesh, Vietnam, and Turkey are doing better.
After three years of sluggish growthgarment exports, including woven and knitted, grew 31 per cent in value (dollar terms) in October and 22 per cent in November as per data from the Apparel Export Promotion Council (AEPC).During April-October, exports were nearly 16 per cent more (in value) than the same period last year.
In 2012-13, total garment exports from India were to the tune of $12.9 billion, which was about four per cent lower than the previous year. In comparison, exports this fiscal are projected at between $16-17 billion.
The industry has already exported garments worth $8 billion in the first seven months between April and October.
Apparel constitutes nearly 40 per cent of India’s textile and clothing exports and almost 30 per cent of the Indian garment production is for the export market.
The exporters cite several factors for the notable jump — revival of the U.S. and the European Union markets, tapping opportunities in non-traditional markets, rupee depreciation and orders flowing to India because of higher production cost in China.
Apparel imports Apparel imports by the U.S. from India during the first 10 months of this calendar year (2013) are 7.2 per cent more than last year.
Though the U.S. and the EU account for more than half of garment exports producers are gradually sharpening their focus on newer markets such as Japan, South America, Israel and Australia.
Crucially, the rupee depreciation has given a major cost advantage to exporters. The realisation per piece of garment has gone up, though not much in dollar-terms. Yet, Gautam Nair, Managing Director of Matrix Clothing says that overseas buyers are relatively consolidated and there is pressure on prices.
Competition from China and Bangladesh P. Natraj, Managing Director of KPR Mills, which has an integrated facility, says that India’s biggest competitors in the apparel sector are China and Bangladesh.
During the last two years, however, Chinese labour and production costs have increased multi-fold. India’s labour costs are also going up, but they are still not as high as China’s.
So, apparel exporters here are able to offer competitive prices.
Bangladesh still enjoys a price advantage over compared to India. However, recent incidents such as the collapse of the building that housed a garment factory have turned the focus on statutory issues.
Several international buyers are now looking at suppliers in other countries and India, Vietnam, Cambodia and Indonesia are benefiting.
“I am confident India can sustain its growth in garment exports as the Chinese and Bangladesh costs will go up and India has the advantage of raw material availability,” Mr. Natraj says.
Taking stock So, what are the advantages and challenges for the Indian exporters? Domestic availability of the raw materials — cotton and yarn — is an advantage. Almost 80 to 90 per cent of the textile processing sector has taken measures for the pollution problems. The Government is supporting value addition and vertical integration of production facilities.
“High labour cost is faced by other countries too. What we need to focus on is vertical integration,” says A. Sakthivel, chairman of the AEPC. Only by scaling up production capacities Indian manufacturers can cater to high volume orders. Since production costs will go up in India too over a period of time, the manufacturers will have to improve efficiency and productivity levels to control costs.
Apparel exporters should also strategically focus on the product segment where they can offer competitive prices compared to Bangladesh or Vietnam. The country’s textile industry base is comparatively larger but the fabric sector needs to be strengthened to add to the competitiveness of the garment units.
A vision document prepared by the AEPC aims at 5.3 per cent share for India in the global apparel market by 2015.
If that goal is to be achieved then the industry needs to build on the current momentum as similar opportunities might not come knocking again.
soundariya.preetha@thehindu.co.in
