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    View: Can India regain its textile glory? Here're the right answers

    Synopsis

    Here's how India can reverse the slide in apparel exports and ride a high growth path.

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    By Ajay Srivastava

    A look at last year’s apparel export figures is chastening. China exported $145 billion, Bangladesh $36 billion, Vietnam $33 billion and India a mere $17 billion. India is far behind China and steadily losing to smaller countries.

    The biggest reason is India’s near absence from the main product category that accounts for 70% of world trade in apparels – synthetic apparels. Today, most formal, sports and fashion wear uses synthetic fabrics. They are durable, do not fade, can have any colour. Easy blending with wool, cotton, or rubber allows experimentation. Unsurprisingly, synthetics have overtaken cottons and become favourites of the fashion industry.

    With weak synthetics, India’s apparel industry is a horse running with one leg tied. The results are low exports, low wages, and low investments in the sector. Here is how.

    Globally cotton dominates spring and summer sales seasons. Synthetics and blends dominate autumn and winter seasons. Indian units run six months a year to produce cotton apparels. In the remaining six months, most units are shut or run at a low capacity as they do not have orders for synthetics/ winter wear. Most workers go home.

    Also, a factory that runs only six months a year still has to pay the full year’s fixed costs – rent, salary for minimal staff, interest on loans, etc. This makes anything made in the factory expensive.

    Absence from synthetics also affects workers’ wages. Winter wears are more expensive than informal cotton wear. So, at 20% labour cost, a worker making a suit would earn more money than the worker making a blouse. Since India is mainly an informal cotton wear exporting country, wages remain at minimal levels. Entry into synthetics would make factories run full year, and increase wages manifold.

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    Why is India weak in synthetics? Here are three major pain points.

    One, expensive raw material. India is almost a captive market for a few large firms that produce 90% of the synthetics raw materials consumed in India. Domestic prices are tied to import prices. And imports are expensive because of high customs and anti-dumping duties on raw materials like PTA, PSF, PFY, acrylic fibers, etc. Duty-free imports to exporters offer some relief, but the domestic synthetics ecosystem remains stunted.

    Two, weak weaving and processing. The textile value chain consists of yarn making, weaving, fabric processing and apparel making. Weaving and fabric processing are the weak links that threaten to fragment this chain, forcing the export of yarn and import of fabric.

    Most weaving and processing units are small, informal units that lack expertise, scale and technology. Power outage and reduced capacity use doubles the cost of weaving in India, making it as expensive as in the EU or US.

    Fabric processing faces similar issues. Chinese units process 10 lakh metres of cloth a day, Indian units less than 20,000 metres. For large orders, Indian units do batch processing that often results in output with varying shrinkage, feel and shades. Also, most Indian processors are struggling to meet the zero-liquid discharge (ZLD) norms set by Madras high court in 2011.

    Not surprisingly, while India is the number one yarn exporter (India 23% share, China 13%) when it comes to fabrics, performance falls (India, 6%, China 52%). Yarn sector has large units, while weaving and processing happen in small informal units.

    Three, low preparedness of Indian exporters to meet the demands of the fast fashion industry (FFI). Key FFI players are the low-cost retailers like Walmart, high fashion brands like Zara, H&M, Gap, and online-only retailers like Amazon, Zalando. They conjure new fashion trends and convert designs into affordable clothing within a few weeks. Any delay means a change in fashion and the product ending into surplus. This forces FFI to place orders only with firms that deliver fast and are compliant with labour and other rules.

    Cost is an important issue. One metric used by FFI for making payments to apparel manufacturers is standard allowed minute (SAM). It measures the time taken in making a garment. FFI firms compare SAM across manufacturers and countries while placing orders. Skilled labour and the latest technology are a must to ensure a good SAM. 80% of Indian exporters do not meet SAM or other requirements.

    A three step plan will unshackle the sector and set it on a high growth path.

    One, lower import duties on synthetics raw materials. Lower duties will bring down the prices by 30% to 50%, almost at par with global prices. This would free the apparel industry to scale up and invest in synthetics. Without low import duties, the synthetics industry and hence exports cannot take off in a big way.

    Two, strengthen the weaving and processing segments. Only large units with the latest technology can meet the quality requirements. Setting up ten big scale weaving and processing units could be an annual goal. High investments in the latest machinery set Chinese industry on a high growth path.

    Three, take priority action to make more factories FFI compliant. The good news is India has about 1,200 compliant factories supplying cotton products to FFI and other large buyers. Many of these would invest in synthetics and export new products to the same set of buyers.

    Indian has a rich textile heritage with thousands of firms and skilled craftsmen. The suggested actions would make us a significant player in apparel trade. The industry engages 50 million people. Change will benefit everyone associated.

    The writer is an Indian Trade Service officer. Views are personal.


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