The Hindu Business Line : India looks no match for China's textile prowess

THOUGH India is recognised as having tremendous potential to increase its textile exports over the next few years, it looks no match for China, as the dragon country is billed to corner close to 50 per cent of the global trade by 2010.

According to industry sources, besides its mass production/high volume manufacturing capacity in almost every textile fibre category, China's fiscal policies are also supportive. Further, China has managed to peg the dollar at 8.26 yuan for the past eight years, though there has been a lot of external pressure to appreciate its currency's value.

It has also managed to accommodate, according to sources in the textile trade, a higher export incentive (a duty drawback) rate of 13 per cent on f.o.b. value even as its enterprises keep paying a uniform value-added tax of 17 per cent at raw material stage, which enables exporters to claim the 13 per cent on the value of the finished goods.

Even though the per hour labour cost in China is said to be higher than that in India, the Indian exporters widely claim that the Chinese labour productivity is 50 per cent higher than that of India, which, in the final analysis, renders the cost per piece of any finished textile product in China lower by 25 per cent.

Also, land in China is 100 per cent owned by the Government and enterprises can only lease it for 39, 49,59, 69 or 99 years depending on the location. For industrial sites, land can be leased from as low as $2 to $16 per sq. metre — one-off payment for the entire period. The enterprises would just need to spend on superstructure and they would have to pay only nominal tax and other utility fees. This makes the rental cost negligible compared to India.

The cost of working capital made available by banks comes at a maximum rate of 5.22 per cent a year and this is again negotiable with individual banks, based on the customer rating.

The loan for capital investment in terms of US dollar is at international rates and in terms of yuan, the interest rate would be as low as 2 per cent a year. But the flip side is that loan repayment record of most of the big borrowers, according to the sources, is quite poor and the official non-performing assets of the top five banks in China is said to be 37 per cent.

The power cost in China is rated at least 40 per cent cheaper than that in India. While these are the general benefits enjoyed by Chinese-owned companies, including those engaged in home textile manufacture, the rules may differ in the case of foreign-owned enterprises.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page