Once again, potential of textile industry has been ignored
The apparel and textile sector is once again disappointed, with the government's much needed help eluding them in the current budget. Maybe it is industry's fault for its failure to project to the current government the problems and opportunities that face this industry today, writes Sudhir Dhingra.india Updated: Jul 07, 2009 01:08 IST
The apparel and textile sector is once again disappointed, with the government's much needed help eluding them in the current budget.
Maybe it is industry's fault for its failure to project to the current government the problems and opportunities that face this industry today.
No doubt the Western markets of the US, Canada, Europe and the United Kingdom — the main markets for Indian textile industry — have been hit by deep recession. Many stores and businesses have either reduced their buying or even closed down completely.
But the fact is the global apparel and textile industry is a giant in its own right. Sized at over 400 billion dollars annually before last year, it shrunk by 15 to 20 per cent during the downturn.
Buyers are now looking for sharper prices and quicker deliveries, with innovative products to charm their customers back to stores.
'Everyday reduced prices' is a popular slogan but we must not forget that even today the industry stands at over $325 billion annually and India's export, at its height, wasn't even worth $18 billion, representing under 3 per cent of the global market. Countries like Bangladesh have overtaken India.
The real reasons behind the failure are:
Inefficiency and low labor productivity;
Higher transaction costs; and
Poor infrastructure leading to higher costs.
Foreign buyers are placing more orders in low cost countries like Bangladesh, Cambodia and Vietnam, or countries that have been given duty-free status by importing countries for their goods on flimsy grounds like Sri Lanka and Egypt.
Successive Indian governments have not realised the immense loss of opportunity that such actions have created for Indian exporters.
Over the last year, most of the garment and textile companies have worked on reducing their inefficiencies and boosting their productivity.
This has reduced costs to the foreign customer to some extent, but it's still not enough.
All segments of textile industry have come under price pressures and companies who were producing goods for large buyers and discounters have no further room to reduce their prices, leading to loss of business for India to some of the low cost countries where labor costs are substantially lower than India and their respective governments have helped their factories with direct and indirect subsidies as well.
The bottomline is...
There is no dearth of business for companies and countries that can offer price advantage.
India is a preferred sourcing destination and no foreign customer would like to go to Bangladesh, Vietnam or Cambodia if India could offer them good pricing.
We could fill our factories and rejuvenate the entire textile chain if the government was to realise the potential of this highly labour-intensive industry that employs more than 35 million people in India, out of which most people are illiterate with agriculture backgrounds.
Labor-intensive industries are the only industries that can help India achieve all-inclusive growth. I wish the government had increased the duty drawback rates and offered duty free trade able import licenses to the exporting community and restored income tax benefits for the next two to three years to increase the competitive edge of Indian garment and textile industry.
(The writer is CMD, Orient Craft Limited)