The Hindu Business Line : `Potential gains from free trade in textiles meagre'

EVEN as exceeding expectations centre around the end of the quota regime in global trade in textiles and clothing from January 1, the country's benefits would only be in a few cases while it is not so in most since domestic policies had not responded in the appropriate manner, says the National Council of Applied Economic Research. In a monograph on India and the MFA phase-out, the independent policy think-tank and premier research body said that in 2002-03, the organised mill sector produced less than 4 per cent of all fabric production in the country and the rest came from the powerloom and handloom sector.

"Nowhere else in the world is such an important industry so disorganised," the council said, adding that therein lay the problem and the Government has not moved fast enough to rectify the situation.

Moreover, it said thanks to government policies, there has been virtually no new investment in new capacity in the past five years. Total new investment in the Indian textile and clothing sector (including modernisation) in the past five years is less than Rs 10,000 crore, it said.

Stating that there has been no significant foreign direct investment, the council said to compound the problem there are no signs of this trend reversing. Besides, there are just about 15 apparel exporters in the country with revenue in excess of Rs 100 crore and another 10 whose revenue falls between Rs 50 and Rs 100 crore.

When the world is witnessing rapid consolidation of brands and retailers, which requires large suppliers, the council said that the strength of even the biggest of Indian companies to scale up to global size remains untested.

Pointing out that the export product basket for garments is predominantly in three categories, it said that in yarn, it already has a dominant share. In fabrics, the country's exports were largely `grey' but with buyers seeking packages, fabrics have to be processed and converted into garments. Fibre-wise, India's strength so far is largely confined to cotton and season wise, Indian garments offer solutions only for spring/summer.

The council said India is not "fully prepared" on any of the four principal activities. They include, the preparation of natural fibre drawing on various agricultural activities; the preparation of textile product that involve manufacturing activities where technological developments have resulted in huge productivity gains; clothing production which goes through several steps (whereas sewing techniques remain basically those of a century ago); and retailing which has changed remarkably with the blurring of the traditional boundaries between retailers and manufacturers.

While most of the major organised players would probably benefit from the quota phase-out in fabric and garments, their overall numbers and contribution to the total Indian textile and clothing industry (about Rs 1,27,00 crore, including domestic and exports in 2003) might add up to an incremental increase of not more than Rs 3,000 to Rs 4,000 crore at current prices or even in 2006, the council estimated. This is just about 5 to 6 per cent of the total export value of yarns, fabrics and garments in 2003-04. "So, while some gains will be there, they will be altogether too small. The target of $100 billion worth of textile exports will remain elusive for a long, long time," the council said.

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