With Chinese exports once more restricted by quotas, buyers in the European Union and the United States are turning to the South Asian countries of Bangladesh , India , Pakistan and Sri Lanka to fill the gap. But with quotas in some cases likely to be in place until the end of 2008, buyers are questioning whether South Asian countries will be able to provide a suitable alternative to China in terms of quantity, product assortment, delivery times and quality.
In 2005, the European Union and the United States implemented comprehensive quota agreements aimed at limiting surges in textile and clothing imports from China. The surges followed the final elimination of global quotas at the end of 2004, after a ten-year phase-out process that started at the beginning of 1995.
FOCUS ON INDIA : HOW COMPETITIVE IS ITS TEXTILE AND CLOTHING INDUSTRY?
Labour costs
Hourly labour costs in India are among the lowest in the world. At only US$0.67 in 2004, they were significantly lower than competitors in the EU and US markets such as Taiwan (US$7.58), South Korea (US$7.10), Czech Republic (US$3.94), Turkey (US$2.88), Morocco (US$2.56), Mexico (US$2.19), Tunisia (US$2.05), Thailand (US$1.29), and the Philippines (US$1.12). They were also lower than in China `s coastal region (US$0.76). Admittedly they were higher than in Indonesia (US$0.55), inland China (US$0.48), Sri Lanka (US$0.46), Pakistan (US$0.37), Vietnam (US$0.28), and Bangladesh (US$0.28). However, such differences are easily overshadowed by differences in other costs and productivity levels.
SWOT ANALYSIS FOR INDIA : STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS
Strengths
- India has an abundant domestic raw material supply. It is number three among the world`s raw cotton producers, and is a significant manufacturer of manmade fibres.
- It has a strong and diversified textile manufacturing base.
- The country has a large domestic market as well as a large and rapidly growing consumer market, enabling its manufacturers to achieve economies of scale.
- Labour costs are minimal.
- India has a large and growing economy, and one which ranks as the world`s number four in terms of purchasing power parity.
- India has a vibrant capital market.
- The country has a good strategic location, being close to the vast South Asian market.
- India has a large pool of skilled manpower and one of the world`s largest pools of professionals.
- The industry is exempt from customs duty on industrial inputs, and benefits from corporate tax holidays for 100% EOUs (export oriented units) and EPZs (export processing zones).
- India has a stable parliamentary democracy, unlike many other low cost suppliers around the world.
- The availability of cloth per head in India is growing.
- The development of IT and communications in India has been rapid.
- India `s foreign currency reserves are growing.
- Gradual progress is being made on structural reforms.
- Industrial cluster formation is taking place in certain cities.
- The first fully operational apparel park has opened in Netaji-Tirupur and more are to follow.
- India has a number of well recognised textile and fashion training institutes.
Weaknesses
- Much of India `s infrastructure is in need of improvement, including ports, airports, roads, and power.
- The garment export industry has a relatively narrow product base: four products account for over half of exports.
- High technology in India is limited to only a few factories.
- Too much of the decentralized garment sector is still based on traditional tailoring.
- There are too many small garment units.
- India is distant from its two main markets, the United States and the European Union.
- The industry suffers from low productivity and inconsistent quality.
- The industry tends to be inward-looking and resistant to change, especially in the case of small units.
- In a survey by the International Textile Manufacturers Federation (ITMF), India `s power costs were found to be the second highest of seven countries.
- Human resources development in the industry has been neglected.
- Textile plants tend to be small in size and low-tech; in particular, there are insufficient numbers of shuttle-less looms.
- The cotton yield in India is low and contamination, high.
- Foreign direct investment is discouraged by low labour productivity, restrictive labour laws, rising costs of imports, and power and infrastructure bottlenecks.
- Labour laws are often weighted towards employees.
Opportunities
- India has great potential to vastly increase its exports now that quotas have been eliminated.
- With its low labour costs, India is well-placed to capitalize on the shift of production to Asia .
- The imposition of safeguard quotas against China will provide India with more scope to expand its share in restricted (and unrestricted) categories.
- The Indian domestic market provides opportunities for economies of scale.
- World fibre consumption continues to increase.
- India has the capabilities and infrastructure needed to capture a slice of the global expansion in technical textiles.
- According to the ITMF, the Indian industry has a competitive advantage in raw material and labour cost in yarn and fabric manufacture.
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