Roadmap for India’s clothing exports

Dr Vinod Shanbhag
Advisor-Academics,
Pearl Academy of Fashion, New Delhi

During 2004, a host of prognostic studies on post-MFA expectations, carried out by prominent international institutions, reached a common conclusion: “The erstwhile geographical dispersion of the global textile and clothing supply chain, created by the MFA regime, will be erased. From the year 2005 onwards, all nations, which survived in the international textile and clothing trade without revealed comparative advantage, are set to decline. The space vacated by them will be filled by China and India to a considerable extent and by a few other nations - notably Turkey, Pakistan, Sri Lanka, Bangladesh, Indonesia - to a lesser extent.”

Indian hopes and expectations since then have been soaring. Late last year, an ICMF-sponsored study delineated a resurgent vision of India in 2010. It postulated that textile and clothing exports could touch USD 40 billion from USD 11 billion in 2002 at an average annual growth rate of 18 percent. Very recently, the findings of an EXIM Bank sponsored study have been, indeed, even more up beat. It is estimated that India would export textiles and clothing to the tune of USD 70 billion by 2014; of this, the US and EU markets are expected to account for USD 42 billion.

Trade data for the first quarter of 2005 reveals that India has held up to the expectations. Exports have grown in volume. Orders for cotton yarns and garments have boomed. Well-established garment exporters have their order books full for a period 6-12 months hence. In the past, such has never been India’s story. There is a rapid increase in the export of cotton women’s wear, particularly blouses. However, export of manmade fibre products shows signs of downward trend. At the same time, the margins are under heavy pressure. The quota premium is eliminated; additionally, the squeeze is on account of increase in order quantity and the competitive influence of other supplier country prices. Suddenly, Indian exporters have realized that the only mantra that can protect their margins and help their survival is a boost in manufacturing efficiency and productivity. The surge in plant consolidation and technology up gradation are clear pointers to the new outlook of exporters.

Sooner or later, to escape from the travails of low margins, the country will need to shift focus to value-added products, particularly in the clothing segment. This shift will have to dovetail with demand side features. India has developed demonstrated competitiveness in 5 items of clothing: women’s dresses/suits; men’s woven shirts; women’s woven blouses; T-shirts; knitted shirts. The world’s most exported products are: jerseys (USD 17 bill.); men’s trousers (USD 13 bill.); T-shirts (USD 11 bill.); women’s trousers (USD 9 bill.); men’s shirts (USD 7 bill.); women’s dresses and skirts (USD 6 bill.); women’s blouses (USD 5 bill.); overcoats (USD 5 bill.); underwear (USD 5 bill.); and jackets (USD 4 bill.). It is very obvious that the country demonstrates sizable presence in only half the number of highly demanded and valuable items. India’s share in global exports of these items of clothing is approximately 16 per cent each for women’s dresses/skirts and men’s shirts, 13 per cent for blouses and 5 per cent for T-shirts.

If the country is to attain export achievement of the scale forecast by ICMF and EXIM Bank, then it is obvious that it must step up its share in the 5 items of competitive strength and penetrate strongly in the others. With respect to products of competence, it is fair to expect that the exports will go up reasonably strongly in the post-quota scenario; but there are some items where import penetration has reached such high level, for instance, in the US market, that demand may plateau out or decelerate shortly. Notable in this respect are shirts, blouses and T-shirts. In such a scenario, the pressure will be to upscale product on the value scale in diverse ways suiting market preferences. For some time, the prevailing volume strategy may prevail for women’s dresses/skirts, as the US market is not yet, reportedly, saturated with imports. India has to diversify to the hitherto untouched product segments and to markets other than the USA and EU. Jerseys, men’s and women’s trousers, overcoats, underwear and jackets demand fabric as well as garmenting strengths, and there is no reason why the Indian supply chain should not be able to make profitable business out of them, given the massive investments in technology that have taken place of late in the critical stages of the supply chain, coupled with the prevailing implicit fiscal incentive for vertically integrated manufacture. Vertically integrated manufacturers will find this avenue very remunerative and it should not be out of their reach to succeed in the short run itself. It will make sense to diversify first to existing markets, where considerable selling prowess already exists, before attempting the same in new markets. The matrix below indicates the desirable strategy for each of the ten highly demanded clothing products in the global market.

(The author is Advisor-Academics, Pearl Academy of Fashion, New Delhi)