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India losing out in textile exports

Written By Views maker on June 25, 2011 | 6/25/2011

It was only a matter of time before India was edged out of its position as one of the major apparel exporters to the US, the biggest market. Official US data show that Vietnam, Indonesia and Bangladesh have elbowed India off its perch among the top five exporters in the January-April period. Despite its strengthening yuan and overheating economy, China remains the numero uno supplier. What is significant is that both Vietnam and Indonesia have benefited from Chinese investments that have helped the two economies use cheaper labour to emerge as major exporters. The same advantage appears to have benefited Bangladesh, where friendly foreign investment policies too have boosted its apparel exports. What can India learn from this shift in export competence?

The loss of a leading slot is not new; a Ficci study last year showed South-East Asian countries and Bangladesh growing, along with China, at a faster clip than India in the US market since 2004. The general view in the post-September recessionary climate was that Indian textile and apparel exports had slipped on account of declining demand; in fact, as the Ficci study showed, the aforementioned countries were still recording healthy growth compared with India and China which were leading the pack. Then, in 2009, Vietnam surpassed India in market share. India has been somewhat complacent about its status as a major textile seller with exporters more keen to wrest sops out of the government, either on account of an appreciating currency or weakening markets. The effort to stay ahead of the competition through technological or product innovation has been far less vigorous than the attempt to match others with low labour costs. And that's the problem. Indian wages are bound to rise as the economy grows and the way to beat cheap-labour competition is by raising productivity and by moving up the value chain. With increasing consumer awareness, Indian exporters need to pay attention to polluting dyes and the use of child labour, while at the same time developing newer, ecologically friendly fabrics.

What the Indian textile industry needs to keep in mind is that not just exports but domestic markets could also be affected by cheap imports from the countries that are now grabbing market share in the US and the EU. Instead of crying for barriers to such imports, textile firms should insist on the adherence of suppliers from Bangladesh and Indonesia to the same ecological and social conditions that the western markets expect of us. The latest data by the US Department of Commerce confirm a trend visible for some years. Policy response brooks no delay.


ogtc said...

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