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Indians reap double
benefit
By Anil Sharma
JAIPUR
- The world textiles industry is in a state of turmoil,
with leading export countries facing a growing challenge
from new and upcoming countries, and in this emerging
environment India is fast consolidating its position as
a major textile exporter.
Even though India's
share of world trade in textiles is just 4 percent, the
outlook for the industry looks bright, with an immediate
bonus coming from the severe acute respiratory syndrome
(SARS) scare in China that has devastated that country's
exports.
China, one of the leading textiles
players in the world with a 32 percent market share, has
been badly affected by SARS as in the industry
face-to-face-contact is important as customers like to
physically see the goods that they are buying. China is
also the largest textile exporter, just ahead of Italy,
Korea and the United States.
And with the end of
the textile quota system under the Multi-Fiber Agreement
(MFA) to take effect in 2005 when World Trade
Organization (WTO) norms come into effect, China was
expecting a further massive boost to the industry.
However, SARS has set the proverbial cat among
the pigeons, with the negative publicity generated
adding to the chaos in the industry, with many customers
- quite irrationally - not wanting to buy garments made
in the SARS-affected nation.
China's loss,
though, has been India's gain. Apparel exports from
India have surged in the first quarter (January to
April), with the US and other countries re-directing
their orders to India. In the first four months of the
year, exports to the US were up 23 percent in volume
terms, while shipments to the European Union increased
by 17 percent - a growth of 40 percent in value terms at
US$190 million to the EU. And in April, apparel exports
to so-called quota countries were up 19 percent in
volume terms (number of pieces), even rising more than
24 percent in value terms at $376 million.
The
pickup in textile exports was particularly commendable
after an 11 percent decline in 2001-02. According to
ministry officials, the sector is likely to post $13
billion in exports during 2002-03 compared to $12
billion the previous year. Trade analysts had predicted
that India would likely become the most important
challenger to China in the post-quota era, starting on
January 1, 2005.
Already, though, Indian
production houses are planning to ramp up their capacity
in anticipation of higher exports, as mentioned, to the
US and and the EU in particular. Indian fabric
manufacturers are also in the enviable position of being
able to reduce material costs. The leading manufacturers
of yarn, like Korea and Taiwan, are unable to offload in
the Chinese markets and are turning to markets like
India and Turkey, with lower rates than usual. Even
cotton imported from West Africa is being offered
cheaper to Indian manufacturers.
Indian
manufacturers also received some sops in the recent
budget. However, all is not perfect as problems in the
domestic industry persist. India's competitive
advantages in clothing have declined over the years as
labor productivity remains low and the industry is
fragmented among many small operators.
Trade
pundits remain optimistic, though, on India's textile
industry. The end of the MFA will certainly help, and
with more support from the government, as well as
revived entrepreneurial activity, the size of the
textile industry in India could be as much as $55
billion by 2010, including as much as $25 billion in
exports, they predict.
Textiles is the largest
industrial sector in India (and the second largest
overall in terms of impact on the economy after
agriculture). The total size of the sector (domestic and
exports) is almost 7 percent of GDP, and at about $13
billion, it still accounts for over 25 percent of
India's exports. More importantly, almost the entire
value addition in this export figure is on account of
domestic input.
(Copyright 2003 Asia Times
Online Co, Ltd. All rights reserved. Please contact content@atimes.com for
information on our sales and syndication
policies.)
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