India currently has the second largest textile sector in the world, after China. But the differences in the shares in international trade and in the sizes of the industries in these two countries are huge. China had nearly 35% of world trade in textile products in 2010 as per WTO’s data, as against our share of 4%. However, economic and market conditions indicate that, in spite of the present temporary setback, this sector has sustainable and long term growth prospects in India, unlike in China which is expected to face increasing problems in sustaining this highly labour intensive industry in the wake of increasing wages, labour militancy and other problems.
But it would be naïve to think that any share that China may vacate in world markets in the coming years would automatically pass on to us since we are the second largest now. Which countries would fill the vacuum that China may create would depend on several factors and the gainers may be different countries in different product segments. Bangladesh and Vietnam are already larger than us in garment exports and Indonesia is caching up with them. The more China loses, the more these three will gain. It is a damaging trend that our export of apparel products is growing slower or losing faster than that of our non-apparel textiles. Going by the present trends, India may increasingly become a supplier of intermediate products to other successful garment exporting countries and the rest of the world, unless corrective measures are initiated immediately for upgrading our garment industry.
Data available from our largest importer, the USA, show that during January – October 2011, their imports of garments from India declined by 4.91 percent compared to the same period of 2010 in terms of volume, but grew by 8.95 percent in terms of value. Non-apparel textiles recorded a growth of 5.75 percent in terms of volume and 15.33 percent in terms of value during the same period. In both the cases, the better performance in terms of value is not much of a consolation, since this is almost exclusively because of higher raw material cost. But what is noteworthy is that in textiles we are the second largest supplier to the USA after China and have a higher growth rate than China’s both in terms of volume and value whereas in garments we have been pushed to the 8th position in terms of volume and 6th position in terms of value. Our garment exports to Europe are under even heavier pressure.
The domestic front is none the better. The latest IIP data released by government shows that our garment industry had a negative growth of 5.7 percent during October 2011 compared to the same month of last year and during April – October 2011 the negative growth was 6.8 percent. Last year, there was a positive growth of 15.4 percent in October and 5.9 percent during April–October. There has been a negative growth of in the non-apparel segment also this year, though it is slightly lower at 3.2 percent during April-October 2011. Data available from BSE shows that the financial results of textiles and clothing companies during the first half of the current fiscal has also been dismal: out of 226 companies in the sector whose results are currently available, 127 have made net losses during April-September 2011. Developments in global markets and commodity prices are primarily responsible for the losses. Most of the losses are for spinning units and some irrational measures taken by government last year added to their problems. Garment industry has very few companies listed in BSE, but the industry is not making much profits.
Demand for textile products may hopefully bounce back during 2012-13 in domestic and global markets because the pipe line is dry now and consumers cannot postpone textile purchases indefinitely. If the western economies pick up meanwhile, the situation will be even better. But the question that remains is to what extent we will be able to utilize the emerging opportunities next year and in the years that will follow. A major factor will be the measures that government may take. And government measures will largely depend on the demands from the industry. Raising conflicting demands with government has produced disastrous results for all the segments of our industry in recent times.
On a long term basis, government can do a lot of good for this sector by just not interfering with its functioning. Government’s efforts to help farmers, weavers, handloom units and other vulnerable segments may have their own merit. But should the help not come from government funds rather than from the other segments of the industry? Cross subsidization has been the bane of our textile value chain in meeting the challenges of the highly competitive global markets; with progressive liberalization of imports, the local market is also feeling the pinch.
