Research Team: Meenu Tewari (External Consultant) and Manjeeta Singh (ICRIER)
Commencement: November 2008
Completion: February 2011
Funded by: Ministry of Textiles, Government of India, 28 months
This study benchmarked the global competitiveness of India’s textile and apparel industry against four select Asian peers (China, Bangladesh, Pakistan and Vietnam). It used the full value sourcing model and product level cost comparisons across the five sample countries to assess the Indian textile industry’s performance in the first four years after the removal of global quotas. Using mixed methods (a primary survey of 240 small, medium and large textile and apparel exporters in India, detailed face-to-face in-factory interviews with 30 firms in three clusters, a survey of 22 global buyers who currently source from Asia and detailed trade data at the 6 digit-level), the study also examined the impact of the recent global recession on the Indian textile industry. The study found that India’s garment exports were not cost competitive with its Asian peers in the products studied. For example, the landed cost per garment in India was among the highest in the five-country sample and its turnaround time the longest. Several factors contributed to these high costs, of which the leading causes were four: high costs of power and energy, costly and inadequate transportation services (including shipping), high and inconsistent taxes (VAT, excise) and high labour turnover and cost. Poor and inconsistent delivery times and buyer perceptions of a difficult business environment have further undermined the industry’s productivity and export performance. With a rapidly growing domestic market and consolidation in export markets, India has an opportunity to gain greater market share by not only overcoming the cost-related bottlenecks it faces but by deepening its competitive advantage in smaller-run more variable production, especially of the “elevated” product in the fashion-basic and fast fashion segments as well as expanding its dominance in key basic products (such as cotton T-Shirts, shirts and bottoms) and home textiles. This will involve becoming very good at fabric development and linking the country’s textile chain, particularly its large power loom sector, more innovatively with the garment chain. It will also require breaking the cost and logistics bottlenecks by strengthening local production networks and expanding local support institutions and services (training, inputs, intermediary services and upgraded technology) in clusters or within specialised textile parks. More systematic exposure to rapidly changing global market trends (via exhibitions, trade fairs and greater interaction with global buyers), end-markets and niche markets (e.g. technical textiles), and assistance in complying with international standards (labour, environment and safety) will also be key factors.