The Hindu Business Line : `Textile cos must form clusters to face Chinese export threat'

DEVELOPING clusters, empowering the small and medium enterprises and establishing Indian textile brands are some of the solutions to the threat of being swamped by Chinese exports in the global market, according to Mr R.C.M. Reddy, Secretary, Textiles Committee, Ministry of Textiles.

He said Indian companies must form industrial clusters, like the ones in Tirupur and Ludhiana, for better bargaining and lobbying power. Infrastructure such as better water supply, power, roads and ports is one area where these clusters and exporters' associations could get assistance from the Government.

The first branding exercise on geographic indicators for the famous Pochampali Ikat weave from Andhra Pradesh would be completed in three months. This would add value to this traditional craft and also protect it from imitations in the global market place.

The second weave going in for the branding exercise would be Chanderi from Madhya Pradesh, he said at a seminar on Indian textiles and garments organised here on Tuesday by the Indo-American Chamber of Commerce (IACC), the Apparel Export Promotion Council and the Textiles Committee.

There is immense political pressure building up in the US against the increasing imports from countries like India, and this pressure is likely to increase unless there is reciprocal market access for American services and products, according to Dr Richard Haynes, Consul General, US Consulate, Chennai.

Dr Haynes said that the Indian industry must cooperate with its US counterparts on research and development and technology upgradation.

Last year almost $200-million worth of illegal textile imports (pirated brands) were stopped by the US Customs from entering the country.

He said that along with the pharmaceutical and software companies there is a need to protect the intellectual property rights in this industry also.

Mr Reddy said the two immediate effects of the dismantling of the quotas, post 2004, would be that the prices would fall further. Countries limited by quotas will increase their exports, while those not using their quotas are unlikely to benefit. The buyers will reduce the number of suppliers. The economics of it would favour large suppliers and work against small and medium suppliers.

Since China is already a dominant player in the global market, India may have to compete for the second place. One example of Chinese domination is that in 2001 Japan, a quota-free country, imported 87.7 per cent of its total garment requirements from China, an increase of 66 per cent over 10 years.

Mr Reddy said exporters should go in for eco-labelling to add value to the product. There are also ethical sourcing codes for exporters to follow. The increased patchwork of free trade agreements with complex rules of origin requirements will also have to be taken into account.

The textiles and garment industry has several strengths in terms of a diverse raw material base, traditional design skills, a large domestic market and cheap labour, said Mr G. Shankar, Chairman, IACC.

On the flip side, the industry is fragmented and dogged by inadequate investment and lack of modernisation. China, on the other hand, has large capacity, superior infrastructure, a well-established value chain and interest cost is 6 per cent.

As per a Crisil study, the market size of Indian textiles and apparels will increase from the present $36 billion to $85 billion in 2010, of which $50 billion will be exports.