Welspun tangle highlights India’s quality challenge

Questions over the exact provenance of bedsheets sold by Welspun India to America’s middle- classes have not only wiped $740 million off the firm’s market value, but also revived one of Indian manufacturing’s enduring headaches: quality.

The government, desperate to accelerate growth and create more jobs, has backed a “Make in India” manufacturing push. India already makes everything from car parts to T-shirts, but is trying to move up the chain to make higher-end products, like Apple’s iPhone.

One major hurdle, however, has been product quality, often blighted by low salaries, poor training and sketchy suppliers. As India manufactures more, cheap is not always cheerful.

So far, in Welspun’s case, US retailer Target Corp has severed ties, accusing it of passing off cheaper sheets as premium Egyptian cotton for two years. Other Welspun clients are probing the company’s products.

It’s not clear what led to the problem. Welspun, whose share price nearly halved this week, has said it would do an external audit of its supply chain.

Other Indian manufacturers distanced themselves from Welspun, but many fretted over the broader impact as the country tries to bet on quality, not just cheap workers, where it faces constant competition from regional rivals.

“It’s high time exporters improve the quality of their products,” said SC Ralhan, president of the Federation of Indian Export Organisations, set up by the government and industry to promote exports. He said the group would take up the issue of quality with its members.

Arvind Sinha, President of the Textile Association of India, said India’s image as a manufacturing destination for textiles could be tarnished.

“This is another blot on the Indian exports resume,” said an analyst at a local brokerage. “The Welspun fiasco could have ripple effects and force companies to scout for options in other regions in Asia that have unscathed records.”

Government officials say the Welspun case is an exception, and don’t expect much damage to India’s reputation as a manufacturing hub.

A Commerce Ministry official said more such incidents could dent efforts to promote India as a manufacturing export hub. “If Indian industry is to survive and thrive, it has to adopt global standards,” he said.

The $108 billion textile industry accounts for a tenth of India’s manufacturing production, 5 per cent of GDP and 13 per cent of export earnings, according to government data. It is the country’s second-largest employer after agriculture.

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