India to flood the world with
textiles By Arun Bhattacharjee
NEW DELHI - The year-end expiry of the
multifiber agreement has generated new hopes for India's
textile and apparel industry, particularly in terms of
exports to the West. In preparation, the beginning of a
new government industry collaboration to keep India's
textile flag flying is now under way, welcome news given
that India has seen more than 100 of its textile mills
close over the past few years, with some well-known
names still fighting to get out of the red.
The
multifiber agreement, established in 1975, allocates
quotas on the amount of clothing and textiles that
developing nations with cheap labor can export to rich
countries, expires January 1, 2005. For once, India is
ready for the opening up of these key markets,
particularly in Europe and the US, and has already made
careful, strategic plans such as the integration of
agriculture (long staple cotton), yarn and textile
production to avoid cotton price fluctuation which would
affect textile production costs.
A new
generation of managers is running Indian mills now and
is more focused on integrated mills, for their quality
and cost-saving factors. Meanwhile, the government is
keeping a close watch on this industry, considered
perhaps the most advanced growth sector after
manufacturing and services. With most of the European
and US apparel and garment brand producers already set
up in India, the industry hopes to multiply its exports
exponentially. If things go as planned, the country
hopes to increase its textile and apparel trade from the
current US$12 billion to $20 billion, and eventually
touch $30 billion by 2012.
Although India has
been waiting for this opportunity for years, it may not
be easy sailing as it has to compete with China and
Pakistan, and invest nearly $1.2 billion to modernize
surviving textile mills - many have perished due to poor
management, a lack of modern inputs and growing
restrictions on exporting.
India's textile
industry has already invested over $2 billion in
machinery and modern inputs for online production and
quality control in an effort to conform to international
standard. Today, over 70 percent of the country's
textile mills are more modern than those in China and
Pakistan, and industry investment has been encouraged by
the government's liberal policy on external borrowings
and concessions to capital goods imports.
India's Textiles Exports Promotion Council, an
extended arm of the Ministry of Commerce, firmly
believes that a $30 billion target can be reached as
"the building blocks to achieve that target", according
to one senior official, "are already in place". He says
that India is primarily targeting the US's textile and
ready-made garment market, where the country already
holds fourth position after leather products, chemicals
and medicines and engineering goods.
A senior
officer from India's Apparel Exports Promotion Council
(AEPC) says the removal of the apparel quota system will
open up many more challenges and options for India in
the lucrative US market, where in spite of the
limitations imposed by the multifibre agreement, India
was able to increase its textile and garment exports by
46.9 percent in value terms and 41.2 percent in volume
in calendar year 2003, valued at $458 million, while the
value of the total exports to the US was around $1.13
billion. This is likely to take a quantum leap after
January 2005. "For the first time in many years, orders
will not be restricted by a ceiling on exports but
depend on the ability of the industry and investment in
the industry and the quality of its products," the AEPC
official said.
Professor Tapas Mazumder, an
economist who studied the textile sector on government
request, said: "India has a traditional advantage in
this sector as in spite of the British effort to kill
this sector in the colonial days to save their textile
mills in Manchester, Indians continued to excel in this
sector and modern inputs and improved management have
raised this sector to the global standard." He quotes an
A T Kearney Survey report of the US market which says
that 24 percent of US customers have definitely
expressed their preference for Indian textile products
over China's.
For over a decade India's textile
sector was trying to achieve both vertical and linear
integration which includes management, improved
state-of-the-art machinery and ensured raw materials
from within the country. It has reduced its dependence
on the imports of long stem cotton from Egypt and Sudan
and third party purchase of cotton from Pakistan, as
direct trade between the two adversaries has yet to
resume.
A recent study by the Indian Council for
Applied Economic Research shows that the $30 billion
export target is feasible as Indian textile and garments
exports will be worth $15 billion by 2007, within two
years of the removal of quota restrictions and, with a
40-42 percent annual growth, India is likely to become
the leading textile exporting country in the world. The
study projects that part of this growth is likely to be
helped by the relocation of some major textile companies
from the Europe and the US to India for its cost
advantages.
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