Disturbing yarn

Stalled labour reform,knee-jerk policy responses ensure India loses ground to the new textile tigers

Stalled labour reform,knee-jerk policy responses ensure India loses ground to the new textile tigers

Seven years ago,when the quota regime in the global textile market was dismantled,India was seen as one of the biggest potential gainers,along with China. As a report in this newspaper showed,India is losing the plot,especially in high-value apparel exports to the US and EU. Vietnam has surged ahead in terms of supplies to the US. Indonesia,not in the top-five list three years ago,is snapping at Indias heels; so is Bangladesh. In fact,in the EU market,India is a distant fourth in terms of supplies,and clocked lower growth than Bangladesh and Pakistan.

Ironically,this when Chinas hold over these developed markets is loosening. And when India unlike Bangladesh or Vietnam has the advantage of having a domestic presence across the entire raw material base of cotton and man-made fibres. This should have helped its exporters emerge competitive. Instead,India is increasingly being relegated to the position of a supplier of intermediate products to the new textile tigers Vietnam,Indonesia and Bangladesh. This is cause for concern given that the textiles and clothing industry is the largest employer after the agriculture sector. And if its not able to compete,it will continue to cede space abdicated by China to more nimble,aggressive regional players.

While matching wages in Bangladesh or infrastructure in China may not be easy for India,competitiveness of this industry can be improved by unshackling it from constraints imposed by the government. Stalled reform in labour laws has ensured inflexibility in hiring,a key reason why the industry remains fragmented. This has resulted in artificial hurdles in the way of plans by firms to scale up operations. Frequent knee-jerk interventions in the raw material market such as the recent ban on cotton exports imposed by the commerce ministry,which was later withdrawn distort the market. And,of course,support infrastructure,such as power supply,roads and ports,is stuck in policy freeze. There are signs that Western economies are showing signs of a pick-up,but the capability of the Indian textile industry to take advantage of this is in serious doubt.