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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.

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Jun 10, 2003


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