Indian apparel export industry in the post-MFA phase-out period: challenges and strategies.

Kathuria, Lalit Mohan ; Singh, Raghbir

Introduction

The textiles and apparel industry occupies a unique position in the Indian economy as it contributes significantly to the industrial production, employment generation, and foreign exchange earnings. It has immense potential for employment generation, particularly in the rural and remote areas of the country on account of its close linkage with agriculture. Currently, the textiles and apparel sector contributes about 4 per cent to the India's gross domestic product (GDP), 14 per cent to the industrial production, 26 per cent to the manufacturing sector, 15.9 per cent to the country's total export earnings, and 18 per cent to the industrial employment. Apparel constitutes approximately 45 per cent of the country's total textile exports (India in Business 2007, WTO 2007). According to a survey conducted by CRIS INFAC (an industry information service on apparel), the apparel industry is likely to generate 400,000-450,000 jobs per annum in the next five years (Apparel Online 2006).

It has been estimated that India has approximately 30,000 apparel-manufacturing units and around three million people are working in the industry. India has 4.3 per cent of the global textile market share and approximately 3.3 per cent of the global apparel market share in 2006 (Business World 2004, WTO 2007). Indian apparel export sector comprises approximately 7,500 firms registered with Apparel Export Promotion Council (AEPC).

Table 1 depicts the number of firms according to their export turnover.

Table 1 shows that majority of the apparel-exporting units are miniscule on the basis of turnover. A mere 7.6 per cent of the total companies exports more than Rs10 crore worth of apparel and a large bulk of them (58.92 per cent) export apparel worth Rs50 lakh or less.

Also, Adhikari and Weeratunge (2006) pointed out that 80 per cent of the Indian textile and clothing units are structured into small and cottage units, each of which employs less than eleven workers. Medium units, employing between twenty-one and forty-nine workers, account for 14 per cent of the sector and the remaining 6 per cent comprises large units employing more than forty-nine workers. Whereas Cambodia, which recorded a growth rate of 22 per cent in apparel exports in 2006, has 7 per cent of the apparel manufacturing units employing more than 5000 persons.

This paper undertakes an analysis of competitiveness of Indian apparel export sector and highlights the strengths, constraints, and challenges facing Indian apparel export sector. Also, some strategies have been suggested for Indian apparel exporters in the light of post-MFA phase-out scenario.

Competitiveness of Indian Apparel Export Sector: Strengths and Challenges

With the phase-out of MFA quotas and termination of the same at the end of the ten-year transition period on 31 December 2004, the apparel exporting countries are competing intensely with each other for market share without the umbrella of bilateral quota system. China, Bangladesh, Pakistan, Mexico, Vietnam, and Sri Lanka are posing a tough competition to India in the international market. Table 2 reveals that India has 3.3 per cent share in world apparel trade in 2006 and is facing stiff competition from countries like China (30.6 per cent), Turkey (3.8 per cent), Bangladesh (2.8 per cent), and Mexico (2.0 per cent).

Table 2 reveals that India has not been able to take much advantage of the opportunities coming its way due to certain structural constraints, whereas China has set about altering the post-quota scenario with latest technology, huge capacity building, and innovations to capture larger chunk of the global trade. Huge industrial facilities in the form of apparel complexes are being developed in China (Business World 2004). The analysis reveals that countries like Turkey, Mexico, and Bangladesh have managed to increase their share due to certain factors like market proximity or due to duty free access into the importing country, whereas India did not have any such advantages. Still, India has been registering a growth rate though not so impressive.

Competitiveness of an industry depends on its ability to obtain inputs at competitive terms, add effective value through efficient processes, and successfully market its output to downstream industries (Momaya 1998). India needs to gain competitive advantage along with comparative advantage. Quality, flexibility, product variety, and effective delivery mechanism will be some of the other key drivers along with comparative advantage. For achieving sustainable competitive advantage, every advantage including comparative advantage is to be upgraded. Competitiveness has to be gained on strengths like value additions and fashion apparel, which are not easily imitable by competitors. Factor advantages such as abundant labour, cheap labour cost, etc., have to be enhanced with skill upgradation as the factors leading to competitive advantage are specialized and more advanced (Porter 1990 cited in Koshy 1997). 'Qualifying aspects' and 'Order winning' aspects of competitiveness are to be identified for the industry (Slack 1992 cited in Koshy 1997). High performers possess special and hard-to-imitate features which allow them to outperform their competitors and these unique skills and resources are referred to as sources of competitive advantage (Porter 1985; Bhardwaj et al. (1993) cited in Koshy 1997).

Cost competitiveness, adequate supply conditions, faster delivery mechanism, variety of handcraft and design abilities, ability to print, flexibility in meeting small orders, value additions, product and market diversification, and product quality are the main sources of competitive advantage in apparel export trade (Koshy 1997; Ramaswamy and Gereffi 2000).

Cost Parameters

India is considered to have abundant availability of unskilled and semi-skilled labour. India has a comparative advantage in labour cost over many of the developed countries and other competing countries. Table 3 shows the comparison of labour cost for selected countries and reveals that labour cost in case of India is lower than that in Pakistan, Bangladesh, Sri Lanka, and China.

India remains competitive in terms of labour cost with the rates ending up nine times lower than South Korea and thirteen to twenty times lower than western Europe (Sasi 2004). Another study estimated India's labour cost per year amongst the lowest (Euro 2,024) in the world (The Economic Times, 12 April 2005).

Though India has cost competitiveness in labour and raw water but this cost advantage is lowered by higher cost of power and cost of steam as compared to China and Pakistan as shown in Table 4. India needs to enhance its competitive advantage by reducing the cost of operations along with retaining low-cost labour advantage and advantage of indigenous cotton and other fibres.

Integrated Production Structure

India has complete value chain within the country as up to 98 per cent of the value addition takes place in the country itself (Adhikari and Weeratunge 2006). India has a major advantage in its value chain as import content for intermediate inputs in case of India is very low (1.8 per cent) as compared to China (5.7 per cent), Vietnam (40.4 per cent), Hong Kong (13.0 per cent), and South Korea (15.9 per cent) as, in the post-MFA scenario, the higher import content in the value chain will reduce the competitiveness of a nation (GTAP Global Trade Analysis Report cited in Rangarajan 2005).

Also, India has abundant supply of cotton, silk, linen, jute, wool, and synthetic fabrics. India is the third largest cotton producer; second largest producer of cotton yarn, cellulose fibre/yarn, silk; fourth largest producer of synthetic fibre/yarn; and largest producer of jute. India produces all forms of silk, for example, mulberry, Eri, Tasar, and Muga (Singhal 2007, Tex Styles 2008).

Table 5 highlights that India has managed to increase its cotton production by 15.4 per cent in 2005-6 as compared to 2004-5 whereas in case of China, the USA, and Pakistan, cotton production has declined.

Indian handwoven fabric finds appreciation in the world market and Indian handloom industry has the inherent advantages of flexibility, small production capacity, low investment, being labour oriented, and openness to market requirements and innovations. India has advantage over China in fashion apparels due to handwork embroidery, printing, sequins, etc.

Koshy (1997) pointed out that India's major strengths are its handcrafted skills, design and creativity, ability to print, ability to produce small quantities, rapid product development, and use of indigenously available cotton, jute, silk, linen, wool, and synthetics fabrics rather than using only imported fabrics. The small-scale level of Indian textiles and apparel sector provides an advantage to exporters as these units can cater to small quantities of fashion apparel and the fabrics requirement for these apparel are met by handloom and powerloom sectors. Strengthening of these areas can generate higher competitive advantage for India.

Tewari (2005b) opined that India is one of the few developing countries along with China, Turkey, and Pakistan, which are having a fully developed value chain with very low import intensity in its apparel exports. Easy availability of quality and competitive raw materials in the form of textiles is an added advantage in the trade scenario where factors like timeliness, low costs, flexibility, and quality are also gaining importance. Competitive advantage can be achieved through creation of relationships between quality suppliers and apparel industry.

Technology

India accounts for 61 per cent of global looms capacity, 22 per cent of global spindle capacity (texstylesindia. com). India has the second largest yarn-spinning capacity in the world after China, accounting for roughly 20 per cent of world's spindle capacity, and approximately 35- 40 per cent of India's spindles are less than ten years old (USITC 2001)

Measured in terms of machinery installed over a period of ten years ending 1999, the spinning sector was relatively more modernized than the weaving sector. Table 6 gives an insight into the technology levels prevalent in India as compared to other countries.

India is second to China in ring spindles capacity and shuttle-less looms (less than ten years old) and has the highest share in OE rotor segment. However, India's share in global shuttle-less looms is only 2.8 per cent of world looms and is ranked ninth in the world (Chandra 2006).

Small apparel importers are likely to order limited quantities in frequent spells, which increases the importance of modern processing and finishing technology supported by quick response systems. Though modernization of weaving sector remained low during the previous period, Indian textile manufacturers are now waking up to the calls of technology upgradation. In 2004-5, India imported textile machinery worth Euro 368 million from Germany and India was the second largest importer of German textile machinery and accessories (Apparel Online, 2007). Between 1990 and 2003, the average investment per firm in plant and equipment in the top ten textile firms, in India, increased by 43 per cent. In the Indian apparel industry, average investment per firm in plant and equipment increased from $ 1.2 million in 1995 to $5.1 million in 2003 (Tewari 2005a).

Productivity

A major constraint in the growth of Indian apparel export sector is low labour productivity due to low technology and modernization levels. For example, in case of shirts, labour productivity for India is 7.88 pieces as compared to 12.18 for rest of Asia and machine productivity for India is 9.99 as compared to 17.47 for rest of Asia (Rangarajan 2005). Average productivity of the Indian apparel manufacturer-exporters lags far behind not only that of the international benchmarks but also the Asian productivity levels. In comparison with manufacturers from South Korea, Taiwan, Hong Kong, and Thailand, it is almost 50 per cent or even less (Business World, 2004).

India's poor productivity levels undermine the labour cost advantage. A study by Ananthakrishnan and Chandra (2005) pointed out that investors are ready to accept higher labour costs if they are compensated by other factors. The labour cost per unit of production is higher in India due to low labour productivity. For example, compared to HongKong's productivity levels of 20.6 women blouses per machine per day, India manufactures only 10.2 blouses per machine per day. Another study by Mckinsey (2004) cited in Ananthakrishnan and Chandra (2005) revealed that Indian exporters' productivity was at 35 per cent of US, levels as compared to China's 55 per cent productivity.

Elbehri et al. (2003) studied that due to small-scale operations of Indian apparel sector, labour productivity is very low. With improvement in labour productivity, India can increase its market share significantly in the world trade.

Domestic Market

The Indian domestic market for all textile and apparel products is estimated at $26 billion and growing at 15 per cent annually. India has a large domestic market that consumes approximately 60 per cent of its domestic textile and apparel output. Competitive advantage can be achieved by Indian apparel export industry by catering to this huge domestic demand thus gaining economies of scale (Chandra 2006; USITC 2003). Greater opportunities exist in the domestic branded segment expected to grow at a compound annual growth rats of 25-30 per cent in next five years (Kothari and Shridhar 2007). Many spinning and fabric mills have forayed into apparel, for example, Arvind Mills, the largest producer of denim in the country entered into jeans and T-shirts, invested more than $30 million in ten new factories (Tewari 2005 a).

Market Proximity: No longer an advantage

Mexico has entered into an agreement with the USA and Canada under North American Free Trade Agreement (NAFTA), and similarly, the Caribbean countries have signed an agreement, Caribbean Basin Initiative (CBI), under which these countries are getting preferential treatment. But statistics reveal that these countries are losing their market proximity advantage due to decreasing communication costs, reduced transit time, and improved efficiency (Adhikari and Weeratunge 2006).

Mexico recorded a negative growth rate in 2005 (-13 per cent) and 2006 (-9 per cent) in apparel exports to the USA. Also, some of the Caribbean countries recorded a negative growth in apparel exports to the USA in 2006, for example, Costa Rica (-3 per cent), Dominican Republic (-16 per cent). Similarly, Romania registered a negative growth in apparel exports to the EU in 2005 (-6 per cent) and 2006 (-2 per cent) whereas India recorded 16 per cent growth in apparel exports to the EU (International Trade Statistics, WTO, 2007).

Consolidation of the industry and fall in prices

Industry insiders are predicting that the world apparel industry is likely to become more consolidated. While the USA currently purchases apparel from 40-60 countries, it is predicted that by 2010, the number of foreign suppliers could be as low as one-quarter or one-third of the current number. Many developing and least developed countries are likely to suffer significant losses amid stiff new competition from China, Pakistan, and Vietnam (Kurt Salmon Associates Technopak, 2000). In 2003, according to United Nations Industrial Development Organization (UNIDO), the two top retailers, i.e., Wal-Mart and K-Mart accounted for one quarter (by volume) of all apparel sold in the USA (Singhal et al. 2004). Factors like turnaround time, reliability, and quality are assuming more importance while choosing a supplier. Due to these adjustments, inefficient manufacturers may lose their previous advantage.

With the dismantling of quota system, premiums for quotas have disappeared. With the elimination of quota management expenses, apparel export prices are likely to fall worldwide. Many developing countries are likely to offer reduced prices to penetrate new markets. It is expected that world trade in apparel is likely to go through a period of consolidation and resettlement and buyer-seller dynamics would be rewritten during this period. India's unit value realization went down to Euro14.30 per kg in January-February 2007 as compared to unit value realization of Euro 18.39 per kg in January-February 2006, thus indicating a fall of 22.24 per cent (Apparel Online, 2007).

In the light of the strengths, constraints, and challenges mentioned above, some strategies have been suggested below for upgrading the competitiveness of Indian apparel export sector.

Strategies for Indian Apparel Export Sector in the Post-MFA Phase-out Scenario

Some of the important steps which may be taken by the Indian apparel export industry, industry associations, and various government agencies for successfully meeting the challenges lying ahead in the post-MFA phase-out period are discussed here.

Flexibility and Capacity building

Though many studies (USITC 2001; Ananthakrishnana et al. 2005; Chandra 2005) highlighted that small scale of operations is causing a disadvantage to India it depends upon the category of customers to whom Indian exporters wish to cater. Suppliers dealing with discount stores like Wal-Mart, etc., need to have higher capacities whereas those catering to specialized departmental stores like Gap, Liz Claiborne, etc., would prefer smaller and flexible production levels. Discount stores like Wal-Mart offer a very low margin and investing heavily in capacities may prove to be a dangerous path, also when more low-cost supplier countries enter into the apparel trade. Smaller operations, flexible production levels, and variable designs helped Indian exporters develop craft skills and meeting the design requirements of the buyers, thus helping the exporters gain a competitive advantage over China and other countries which deal in larger volume and with lower margin. (Tewari 2005a).

Along with retaining the advantages emanating from flexible and smaller scale of operations, India will have to generate bigger firms producing standard products in larger volumes as well as small and mid-sized firms producing large variety of apparel in small quantity. A KSA Technopak Study (2000) figures out that there is a need to have large-scale global capacities having capability of delivering large orders in the export markets. These firms should have the capability of realizing economies of scale, achieve world benchmarks in production efficiencies, and keep costs down. Adding capacities does not mean that flexibility advantage has to be lost. Bigger firms would have to learn to cater to huge orders of millions of pieces as well as smaller orders of 400-500 pieces. Smaller orders having complex designs can fetch higher prices for Indian exporters.

Some of the big exporters have, already, ventured into capacity enhancement, for example, Orient Craft has plans to start three new factories and launch OC Denim whereas Gokaldas Exports Limited has increased its production capacity from 50,000 trousers per month to 80,000 trousers per month. Similarly, Shahi Export House has plans to enhance its capacity in knits by 50 per cent (Apparel Online, 2006).

Investments in textiles and apparel sector have touched $3 billion by 2004-5 (Ananthakrishnan et al. 2005). To gear up the textiles and apparel industry, the Government of India has decided to set up twenty-five apparel parks under the Scheme for Integrated Textile Parks, which aims to provide textiles and apparel industry with world-class infrastructure. The central government will invest Rs40 crores in each park. Apparel parks are being set up at Silvassa, Butibori (Nagpur), and Ludhiana, etc. Another apparel park, promoted by apparel exporter Brandix, is being established in Visakhapatnam and this Rs1000 crore apparel park will include manufacturers of textiles, apparel, and accessories. Brandix will invest $750 millions initially and this investment will increase to $3 billions in the coming years (http://texmin.nic.in).

Backward and Forward Integration

Also, there is a strong need for backward and forward integration from two angles, viz., (a) to ensure regular supply of inputs at consistent quality and become cost-competitive; (b) to add value to intermediate products so as to manufacture final apparel. Many big mills like Raymond, Arvind, and Vardhman have already graduated from fabric exports to apparel exports. Rajasthan Spinning Mills is setting up a trousers unit in Bangalore; ITC is now into export and putting up a new unit in Bangalore; Raymond is contemplating a 50,000 jackets and trousers plant, and Bannari Amman Group is also forging a joint venture with Brandot International, USA, for the manufacture of sportswear and intimate apparel with 800 sewing machine capacity for the international market (Apparel Online, 2006). Smaller units need to join hands together if they are unable to go for yarn and fabric manufacturing facilities.

Product diversification

Dependence on cotton apparel should be reduced as cotton apparel can cater to overseas market only in spring/summer and if Indian apparel has to be on the shelves of importers throughout the year, the industry must concentrate on synthetic and woollen apparel. Cotton-based fabrics and apparel constitutes 61 per cent of India's textiles and apparel exports. Though the share of yarn, fabric, and apparel based on man-made fiber in total exports has steadily increased from 14 per cent in 1990 to 19 per cent in 2003 (Tewari 2005b; Ministry of Textiles 2007), the need remains to shift to other fibres.

Building competitive advantage also envisages product diversification to move from spring/summer to all seasons. Diversifying in products, and targeting higher-end and niche markets will boost the competitiveness of apparel export industry (Koshy 1997). Workwear, sportswear, outerwear, nightwear, protective wear, institutional wear, and apparel made of technical textiles offer new areas of growth. Technical textiles offer huge opportunities for India. Technical textiles are defined as 'textile materials and products used primarily for their technical performance and functional properties rather than their aesthetic or decorative characteristics'. Various end-use segments of technical textiles include Agrotech, Buildtech, Clothtech (apparels and shoes), Geotech, Hometech, Indutech, Meditech, Mobiltech, Oekotech, Packtech, Protech, and Sporttech (sports and leisure wear, active wear, outdoor, and sports articles). Apparel exporters should use anti-bacterial and anti-microbial fibres for manufacturing gym apparel, sports underwear, socks, etc. Already, some of the Indian manufacturers have started venturing out into technical textiles, e.g., Madura Apparels recently launched a 'smart shirt'.

Global market for technical textiles was estimated to be around $107 million during 2005 and it is expected to increase to $127 million by 2010. The drivers for future growth of this industry are expected to be Asian countries like China and India. Technical textiles are predominantly man-made/inorganic fibre/ yarn because of the inherent advantages of strength and versatility of such fibres/yarns. Indian technical textiles industry is present in all these segments but mainly active in clothtech, packtech and sporttech segments. India has fundamental strengths in textiles and apparel industry, which can be utilized to gain advantages in technical textiles market. Through cost-competitive manufacturing, 'value for money' pricing strategy, and with technology upgradation in weaving and processing sector, technical textiles can boost India's share in world trade. Also, India is one of the largest players in printed fabrics production, which is a major source for technical textiles.

Technical textiles is a capital-intensive industry and Indian apparel manufacturers can take advantage of Technological Upgradation Fund (TUF), launched by the Government of India. The Government of India has taken several initiatives to promote technical textiles industry. Machinery for manufacturing of technical textiles has been covered under concessional list of 5 per cent basic customs duty. Excise duty on MMF/ yarn has been reduced from 16 per cent to 8 per cent. Technological Upgradation Fund Scheme (TUFS) is providing assistance for the purchase of machinery required for the production of technical textiles. Till date, forty-six projects worth $216 million have been sanctioned under TUFS (Ministry of Textiles 2007).

Export market diversification

Apparel exporters need to diversify into other markets, as a large share of India's total apparel exports is concentrated into the US, EU, and Canadian markets (Koshy 1997). India's textiles and apparel exports to the USA and the EU together account for about two-thirds of India's textiles and apparel exports. The need is not only to broaden the product portfolio with economies of scale, but also to intensify our efforts to enter newer markets like those of Australia, New Zealand, South Africa, Japan, the Middle East, Brazil and Peru in South America, Russia, the West Indies, and the northern European countries like Norway, Sweden, and Finland in a big way besides Switzerland in central Europe.

Cluster development

Small and medium enterprises (SMEs), which are primarily decentralized, play an important role in the textiles and apparel sector of the country. The predominance of small and medium enterprises can easily be ascertained in the entire supply chain of the industry right from cotton ginning to apparel manufacturing. However, these small enterprises have capacity constraints due to lack of finance.

The Government of India has initiated several measures to address various critical needs of SMEs in the textiles and apparel industry. The textiles Committee has launched Cluster Development Programme (CDP) that aims to achieve synergy at cluster level. The Textiles Committee has launched a national programme for capacity building of SMEs on cluster-based approach, in twenty clusters, from 2002 onwards. Under Netherlands Management Cooperation Programme (NMCP), located at the Hague, some companies located in Kanpur, Panipat, Karur, Tiruppur, Ludhiana, and Rajapalayam clusters have applied for technical assistance of NMCP in areas related to quality improvement, marketing assistance, etc. (Textiles Committee 2003). Small apparel exporters should form a consortium to integrate backwards in order to reduce lead time, consistency of quality, and cost competitiveness and also to show a respectable manufacturing scale to the buyers and a strong buying power to vendors.

For example, in Tiruppur and Ludhiana, efforts are to retain the advantage of cost on competitiveness. Firms in the Tiruppur cluster have established captive power plants. Approximately 180 companies of this cluster have joined hands to set up a windmill project that will bring down power costs by more than 30 per cent. Also, efforts are on to upgrade the eight ordinary effluent treatment plants into reverse osmosis units to make better use of water (Business World, 2004). In the Ludhiana cluster also, a change is taking place though at a slower pace. The textiles Committee and the United Nations Industrial Development Organization (UNIDO) have launched a programme with the objectives of assisting the industry in quality improvement, defect analysis, cost reduction, inventory control, and stores management techniques. As a result of this programme, some of the units have implemented ISO 9000 QMS and obtained certification. Under the Cluster Development Programme (CDP), efforts have been initiated to make the Ludhiana exporters aware of the importance of technical textiles. These small steps would bring product diversification in the Ludhiana cluster (Textiles Committee 2003).

Reduction in lead-time and transaction cost

Apparel exporters need to make efforts to reduce the lead time in a planned manner, from the stage of order placement to delivery. Exporters have to understand that apparel in general and fashion apparel in particular are perishable products. Exporters need to provide considerable attention towards quick sample development, fast turnaround in production, and shorter lead times. Given the high inventory-holding costs, most European retailers prefer to deal with suppliers who can replenish stocks in shorter lead times.

China has a 13 per cent cost advantage in shipping garments from Shanghai to the US east coast. Also, only transportation time from India to the USA is twenty-four days as compared to eighteen days from Thailand, fifteen days from China, twelve days from Hong Kong. In the case of customs processing, India takes 10.3 days as compared to seven days in Korea and Thailand (Winters and Mehta 2003 cited in Ananthakrishnan et al. 2005). Another study conducted by World Bank highlights that Indian transaction costs are 15 per cent higher than that of its competitors (Business World, 2003). Apparel has to be, often, airlifted because of the delays associated with poor infrastructure, which adds to the shipping cost and making apparel exports from India less competitive. The Government of India should take immediate steps to improve the existing road, rail, power, and port infrastructure. High cost of power, poor rail and road system, and lack of adequate facilities at the ports increase the transaction cost of the apparel exporters.

Technology, Labour productivity improvement, and labour reforms

The main reasons for low productivity are lack of economies of scale, lack of state-of-the-art technology, non-availability of technology transfer schemes, and lack of exposure to the best practices in apparel manufacturing and productivity. The Government of India should set up an institution for undertaking benchmarking exercises for productivity improvement and promoting technology transfer through joint ventures. It must also undertake labour reforms at the earliest so as to make them industry-friendly. The most important reforms to be urgently undertaken are: no interference of political parties in labour unions, classification of apparel exporters under essential services wherein strikes are banned since export units have to adhere to delivery schedules of their overseas buyers, and freedom to hire or fire workers.

Already, government is implementing various schemes like Technology Upgradation Fund and Technology Mission on Cotton to facilitate Indian textiles and apparel industry to grow at a higher pace. From 1 April 1999 to 31 December 2006, the textiles and apparel industry has been sanctioned Rs23,623 crore under these schemes and loan amount worth Rs14,902 crore has been disbursed to the industry. Exporters should upgrade technology in their units by availing of the facilities under these schemes.

Awareness about non-tariff barriers

Though quotas have been removed from January 2005, but major importing countries are devising new ways to restrict imports from many developing countries like India and China. Various non-tariff barriers like antidumping legislations social compliance regulations under the name of Worldwide Responsible Apparel Production (WRAP) are being used to contain imports. WRAP principles relate to compliance with workplace regulations, prohibition of forced labour, prohibition of child labour, prohibition of harassment or abuse, prohibition of discrimination, compensation and benefits, hours of work, and health and safety, etc.

The Government of India through the Apparel Export Promotion Council (AEPC), the Textiles Committee and the industry associations should make exporters aware of all these regulations and guidelines through regular interactions.

Conclusions

Indian apparel exporters have to be efficient in handling complex designs in smaller lots in this scenario of intense competition. As a part of competitive strategy, apparel firms will have to gain ability to create new designs not only for samples but also for bulk production. It has become the need of the hour that our procedures become simpler and global practices be adopted in the procedures concerning port handling, custom clearances, and transport arrangements. Efforts of the Indian apparel export industry have to be complimented by the Government of India through speedy implementation of labour reforms, infrastructure improvement in the form of rail and road networks, port infrastructure, power availability and differential rates of electric power in favour of exporters, and skill upgradation through opening up of more training institutes. Cost advantage, good product quality, supplier reliability, and effective delivery mechanism are becoming the qualifying criteria whereas for winning orders, exporters will have to gain competitiveness on parameters like speed, flexibility in value chain, consistency in supplies, design development, productivity, corporate social responsibility, and building relationship.

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Table 1 : Number of Units (Turnover-wise)

Turnover (Rs) Number of Companies

Above 100 crore 15
50-100 crore 29
20-50 crore 180
10-20 crore 306
5-10 crore 467
3-5 crore 469
2-3 crore 406
1-2 crore 762
50 lakh--1 crore 761
Below 50 lakh 4110

Source: Business World 2004.

Table 2 : Leading Exporters of Apparel in the World Trade, 2006

 Value Billion Share in World
 Dollars Exports %
Countries
 2006 1980 1990 2000 2006

China excluding Hong Kong 95.4 4.0 8.9 18.2 30.6
Turkey 11.9 0.3 3.1 3.3 3.8
India 10.2 1.7 2.3 3.1 3.3
Bangladesh 7.8 0.0 0.6 2.0 2.8
Mexico 6.3 0.0 0.5 4.4 2.0
Vietnam 4.8 -- -- 0.9 1.7
Romania 4.4 -- 0.3 1.2 1.4
Pakistan 3.9 0.3 0.9 1.1 1.3

Source: International Trade Statistics, World Trade Organization, 2007

Table 3 : Comparative Labour Cost in Selected Countries
(US$/hour)

Country Average hourly wage ($)

Bangladesh 0.39
China 0.88
India 0.38
Pakistan 0.41
Sri Lanka 0.49

Source: ITC (2004) cited in Goldstein et al. 2006.

Table 4 : Cost Parameters in Selected Countries, 2002

Cost Parameters India China Pakistan

Cost of Power (Average) 8.87 6.04 6.57
(US cents per kWh)

Cost of Raw Water 13.40 15.00 14.71
(US cents per m3)

Cost of Steam 1.96 0.58 1.41
(US cents per kg)

Source: Gherzi analysis, 2003

Table 5 : Share of different countries in world cotton
output (000 tones)

Country 2004-5 2005-6 % Change

China 6,320 5,770 -8.7
United States 5,149 4,410 -14.4
India 3,315 3,825 15.4
Pakistan 2,465 2,210 -10.3

Source: Goldstein et al. 2006

Table 6 : Comparison of Technology Level in Selected
Countries (%), 2002

Technology Level India China Pakistan Indonesia

Ring spinning 29 38 16 17
spindles
(< 10 years)

OE Rotor 35 28 6 34
(< 10 years)

Shuttle-less 69 74 29 36
looms
(< 10 years)

Source: Gherzi Report, 2003