The Hindu Business Line : World textile market — India must weave new designs

The rising rupee has brought into sharp focus the exporting industries, especially the textiles and clothing sector, for which the Union Textiles Minister, Mr Shankar Sinh Vaghela, has even hinted at some relief. The sector as a whole got a boost in the Foreign Trade Policy (FTP), while specifically the handloom and handicrafts segment was in focus in the Annual Supplement to the FTP.

Further, the Government is trying to create an environment to attract an investment of Rs 1,40,000 crore in the Eleventh Plan period when the textiles and garment exports are expected to rise from the current $14 billion to $40 billion. But is the textiles industry ready for all this?

Key Sector

The textiles and clothing industry occupies a significant place in India's economy. Being the largest foreign exchange earner, contributing to over 20 per cent of India's exports and 14 per cent of industrial output, accounting for more than 5 per cent of GDP and providing direct employment to 38 million people, primarily the weaker sections, it is the second most important sector only after agriculture.

The industry is fairly matured, considering that even from the 18th century it has been the back-bone of the economy, especially the external trade, by exporting a wide variety of products despite the restrictive and arbitrary quota regime. The industry is composed of handlooms, powerlooms and mills. While the mill sector is well-organised and modern, the same cannot be said of the powerloom and handloom segments. The mill sector has managed to grab a reasonable share of the world export market.

The No.1 exporter of textiles, China, has a share of more than 10 per cent followed by Korea with 8.1 per cent; India's hovers at 3.5-4 per cent. In clothing exports, China holds a share of 18.5 per cent followed by Italy (6.7 per cent) and India (3 per cent). India's share may look small but in monetary terms it is large.

Changing scene

But the scene could change as not only are quotas out with the repeal of the Multi-Fibre Agreement, financial help such as subsidies that are not WTO-compatible will also have to be phased out. Even such benefits as Generalised System of Preference may not be available for long in view of the increasing share of Indian textiles and clothing in the world market.

Thus, the Indian textiles and clothing industry will have to compete in the global market entirely on its intrinsic strengths and competitive edge. The survival of the industry will depend upon how quickly it readies itself to face the stiff competition in the world market.

The Indian textile industry faces a host of constraints. Fragmented structure with the dominance of the small scale sector, high power costs, rising interest rates and transaction costs, unfriendly labour laws and logistical disadvantages in terms of shipping costs and time pose serious threats to its growth. Foreign investments are not coming in as the overall factors influencing the industry are not investment friendly.

This is also notwithstanding the fact that India is perceived to have huge potential as it has superior design and processing capabilities, a large base of skilled cheap labour, multi fibre raw materials, and a large and growing market.

Clearly, the opening up of the textile world, after the MFA phase out, has offered India an opportunity and posed a threat to it. Opportunity because it opens up a market sans any restrictions. Threat in terms of no guaranteed offtake even as the domestic market getting exposed to competition.

Two-Pronged Strategy

The textiles industry is not competitive enough to take full advantage of the open global market. A double-pronged strategy, at the level of the government and trade and industry, must be initiated to meet the new challenges.

India's core competence lies in its huge natural resources and factor endowments such as raw cotton and cheap labour. The industry must exploit these before it loses their advantage. Further, it should invest in Research and Development, reduce transaction costs and improve raw material base. The Government, for its part, may try to provide market access to Indian exporters through bilateral agreements with major consumer countries, amend the labour and land laws for the smooth functioning of the industry, and create an investment friendly environment for foreign investors to bring in funds.

Extension of the TUFS (Technology Upgradation Funding Scheme) and higher budgetary allocations must be used well to raise the standards of the handloom and powerloom sectors. The handloom sector's appeal of ethnicity and offerings in terms of print variety or unique embroidery needs to be marketed well.

Among the ethnic textiles products, Rajasthani bandhini, Sambalpuri and Kanjeevaram saris have charmed the world with exquisite designs and colourful schemes.

Also, the industry needs to move up from the lower end of the market and export high value-added products of international standards.

The industry must also consider producing items that are a mix of cotton and the synthetic.

There is a huge demand in the world for such products as they are easy to maintain and, also cost less compared to pure cotton products. Diversification of the product range should prove beneficial for the industry.

There is no doubt that Indian textile industry has all the potential to make a mark in the world market. But required is the strategy that leverages the industry's strengths and corrects the weaknesses so that opportunities are exploited and threats tackled.

(The author is a Faculty Member at the Indian Institute of Foreign Trade, New Delhi.)

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