The Hindu Business Line : `Govt, domestic textile industry should get their act together'

AS the countdown for dismantling of the quota regime governing the global trade in textiles and clothing begins by the end of this month, the Indian textile and clothing industry finds itself in an unenviable situation with all its strengths, weaknesses, threats and opportunities presenting themselves in a weird fashion.

Sources in the Government told Business Line here that the global trading milieu in the textiles and clothing sector is likely to become more competitive with the expiry of the Agreement on Textiles and Clothing , the pipeline protection phase that was hammered out in 1994 by the WTO, ahead of the termination of the Multi-Fibre Arrangement which parcelled out quotas and lent a sort of captive markets to low-cost suppliers of raiment to the globe.

A recent study by the investment rating agency Crisil (commissioned by the Indian Cotton Mills Federation) said the Indian textiles and apparels industry could compass a potential size of $85 billion by 2010. Of which, the domestic market's potential would be $45 billion and exports would form the balance $40 billion. Nearly 60 per cent of the country's exports would comprise of garments.

Officials in the Ministry of Textiles, while gloating over the spurt in investment in the garment sectors in the recent months and greater utilisation of the Technology Upgradation Fund Scheme by domestic industry, do not gloss over the ground reality of heightened exposure of the domestic industry to import penetration in the domestic market.

The onus is on the indigenous segment to improve efficiency and productivity and prune costs to meet global competition. They say that, in the past three years including the current fiscal, there is a gap between target and achievement of export of textile products due to general recession in the global market and fierce competition from low-cost suppliers such as Bangladesh and China even as the tiger economies of the South East Asian countries had shifted their focus from textile to sun-rise sectors.

Meanwhile, a just-published study by the Paris-based intergovernmental think tank of 30 rich industrial countries, the Organisation for Economic Cooperation and Development (OECD) has underscored the compulsive need for all stakeholders in the global textile industry to adjust to the imminent change.

The OECD monograph contends that countries aspiring to maintain an export-led strategy in textiles and clothing ought to complement their industrial cluster of expertise in manufacturing by developing their expertise in the higher value-added segments of the supply chain.

Hence, national suppliers would thus need to lay greater emphasis on education and training in services-related skills, such as design, material sourcing, quality control, logistics and retail distribution and to encourage the setting up of joint ventures where domestic suppliers could share market knowledge and offer more integrated solutions to prospective buyers.

OECD also highlights the key objective of governments to strengthen the capacity of the private sector to deal effectively with the rapid change and burgeoning competition in order to capture trade opportunities that are being fostered through improved market access. They include, among others, supporting the emergence of qualified pools of expertise and the adaptability of the workforce, improving the regulatory environment for essential business services and improved market access for textile and clothing products by seeking to eliminate lingering roadblocks to the establishment of retail distribution system and distorting production measures.

It further noted that the textile industry is undergoing a major reorientation towards non-clothing application of textiles, i.e., technical textiles, which signify the fastest-growing segment of total textile applications.

They are used in many applications, including furniture, automotive, construction, environment and hygiene.

It is estimated that the technical textiles now accounts for more than half of the total textile production.

The processes involved in producing technical textiles are human and capital-intensive and for the moment focused in developed countries.

Finally, lifting import restrictions post-MFA phase-out would leave countries whose regulatory framework is ill-equipped to face competition vulnerable.

They stand to pay a heavy price for inefficient domestic regulatory regimes, obsolete infrastructure in essential business services, cumbersome Customs procedures and other distorted market structures.

With this sort of challenges facing the textile trade, both the Government and the domestic industry must get their act together in order to reap dividends of liberalisation of trade in textiles and clothing, say policy analysts.