Time for India to get garment exports spinning

A country-specific export strategy could turn the tide in India's favour in the sector, explains an industry expert. The world apparel trade stood at $445 billion in 2015 down by 8 per cent from previous year. India's apparel exports grew by 3 per cent in 2015 whereas that of Bangladesh and Vietnam grew by 8 per cent and 16 per cent respectively in the same year. After the phasing out of quotas in 2005, Bangladesh and Vietnam grabbed the opportunity and their apparel exports increased rapidly. Bangladesh surpassed India in apparel exports in 2008 and Vietnam in 2012 as can be seen from the chart below and their apparel exports have been consistently growing and have been higher than India's exports throughout.Apparel Exports of India, Bangladesh and Vietnam to the World[caption id="attachment_11362" align="aligncenter" width="653"]

Apparel Exports of India, Bangladesh and Vietnam to the World[/caption]Source: WTOOverall, government needs to take a closer look at relevant trade, labour, industrial, and infrastructure policies affecting the garment exports of country. Trade and investment policies play an important role in access to capital. Given the relatively high tariffs applied to apparel products in developed countries compared to other manufactured goods, trade preferences shape how countries fare in the global apparel industry. Indeed, they determine the number and volume of orders a firm receives. In the US, which is a major market, we still face tariffs as high as 32 per cent on clothing. As a least-developed country (LDC), Bangladesh enjoys duty-free access under the “Everything but Arms (EBA)” scheme. Vietnam also gets duty-free access in Canada, European Union (EU) and Japan.India may also have to relook at its export incentives in the light of our WTO commitments.India needs to focus on synthetic fibres to cater to the world market as the top 10 traded apparel products in the world (as given in the table below) are synthetic based and India is practically non-existent in all of these products. India largely exports products which are cotton based; to tap the export opportunity, our domestic mix which is currently in favour of cotton has to mimic the global demand pattern. The GST rate of 18 per cent on MMF [man-made fibres] is leading to blockage of input tax credit as the GST on fabrics is only 5 per cent. There is an immediate need to correct GST rate on MMF and support the sector by way of bringing in fiscal and non-fiscal reforms, tax holidays, and land availability at subsidized rates.The world over $22-billion worth of knitted jerseys, pullovers, cardigans etc of man-made fibres are traded and India's share is just 0.2 per cent whereas Bangladesh and Vietnam's share is almost 6 per cent each of these products. Similar is the case of women′s/girls′ anoraks, wind-cheaters, wind-jackets etc of man-made fibres and men′s/boys′, anoraks, wind-cheaters, wind-jackets etc of man-made fibres where India is not present whereas Bangladesh and Vietnam have a share of 1 per cent and 4 per cent each respectively in exports of these products.Also there are several large markets like Japan, Canada, Australia, Switzerland and Russia in which India's trade share is very low ranging from 0.93 per cent to 4.3 per cent. India needs to focus on country-specific export strategies; initially four-five major markets need to be identified in which the share of Indian exports can be increased and specific policies to be framed to increase exports in those markets.There is a need to improve the quality and productivity levels to achieve the scale required for increasing exports. For this to happen, the Ministry of Textiles needs to run a National Manufacturing Competitiveness Programme for Lean Manufacturing, ICT, Technology & Quality Upgradation, Entrepreneurial and Managerial Development, Design Promotion, Quality Management, IPR, Marketing Assistance, etc. This programme should target to cover all textile clusters in the next five years so that the Indian sector comes at par with its competitors in a short span of time.India's wages are lower only compared to China and Cambodia while in comparison to Vietnam, Bangladesh, Indonesia and Myanmar India's garment export manufacturers pays higher wages. Bangladesh's rise as an apparel powerhouse is in large part due to its low wages. Against this backdrop, India will need to find ways to boost productivity to maintain competitiveness. Overall, productivity levels in India remain lower than its competitors China, Bangladesh and Vietnam. In India, labour productivity is almost one-third the level in China in the apparel sector. A key way to increase productivity is by reforming labour regulations, such as those governing number of hours worked during peak demand.[caption id="attachment_11364" align="aligncenter" width="767"]

Minimum Wages in India[/caption]One study finds that India's stringent labour regulations result in lower output, employment, investment, and productivity in the formal manufacturing sector. The recent announcement of the government to employ labour with fixed term employment will largely address this issue. The Indian government last year announced a special package for textile and garment makers, including Employee Provident Fund incentives, tax refunds and relaxation of overtime rules with an aim to create 10 million jobs and boost exports by $30 billion in the next three years. Funds against Return of State Levies (ROSL) need to be released to respective exporters as currently most of the exporters are facing problems in this area. Time taken for shipments at ports, labour laws, dormitories for workers, lower GST rate for man-made fibres and technology acquisition are specific pain points which need to be addressed as a priority for India to perform better than Bangladesh and Vietnam and regain its lost position.To conclude, we feel that the potential for export of garments exists, provided we scale up our operations and attract customers who are willing to place volume orders with us. Also, flexibility in labour laws and better operational efficiencies will improve our competitiveness. While we have to capitalise on our strengths in cotton garments, we should also focus on garments made of MMF fibres, which has a longer export requirement. Lastly, the absence of free trade agreements (FTAs) with bigger developed markets like the EU and Canada are hampering our exports. The government must further address all these issues and create a conducive ecosystem for growth of this sector, which will lead to large-scale employment and exports.Shishir Jaipuria is Chairman, FICCI Textiles Committee, and Chairman and Managing Director of Ginni Filaments Ltd.