India needs to enter global supply chains in apparel

• Despite natural advantages, India’s garment sector has not been able to capitalise on opportunities in global trade.
• Differential duty and tax structure, technological and labour skill upgradation are some of the issues hampering the sector.
• At the same time India’s production is not in synch with global shift towards manmade yarn and synthetic fabrics.
• India needs to look at ways to enter the space getting vacated by China in the garments & apparel global supply chains.

India is blessed with a favourable demographic dividend and has a pool of resources at its disposal that can bolster India’s garment exports. However, India has not been able to fully take advantage of these factors and has consequently lost advantage in the global apparel market owing to a host of reasons.

One major reason for the same is the fact that the differential duty and tax structure along the supply chain have hampered the growth of Indian garment exports. Another major issue is the fact that technological and labour skill upgradation have not been adequate in the sector.

At the same time, India’s production is not in sync with the global requirement. Thus, while India is known for its niche products like fine cotton and cotton-based products, the global demand is shifting towards manmade yarn and synthetic fabrics. This mismatch in demand and supply has not worked in the favour of India’s exporters.

India has so far not been able to reap the benefits of PTAs. In addition, it has been shy of signing PTAs with large economies like EU. On the other hand, competing countries like Bangladesh, having had the advantage of duty-free, quota-free access to the Indian market, have been able to export readymade garments manufactured using cheaper fabric imports from China.

The dwindling exports can also be attributed to the fact that the world has still not recovered from the repercussions of the global financial crisis. The economies of India’s traditional markets like US have grown modestly and the demand has not picked up. India has not succeeded in capturing other potential markets like China, which is transitioning from being a producer to a consumer of garments.

On the other hand, India’s apparel imports are on the rise, which threaten the domestic industry. A major factor contributing to this development is that while the other competing apparel producers have kept up with the transformations across the global clothing market in terms of the supply, market and products; their Indian counterparts have failed to do so. This is why the retailers in India are choosing the products manufactured in the other markets over those produced in India.

India needs to enter the space that is getting vacated by China in the garments and apparel global supply chains. There is a need to tap the potential of our labour and incorporate modern technology to expedite production capacity, bring down the cost of production (power and logistics etc) and bridge the skill gap.

---

Dr. Amita Batra, is currently Professor, Centre for South Asian Studies, JNU. She has worked as Senior Fellow at ICRIER, New Delhi for five years and before that as Reader, Economics, Hindu College, University of Delhi. Dr. Batra has also worked as Consultant for the World Bank, New Delhi and as Visiting Professor at Indian Institute of Management, Ahmedabad.