By Manikam Ramaswami, Chairman, Texprocil
Indian textile exports are growing steadily, ably supported by a strong raw material base. Stable export policies during the last few years too have added to the steady growth, a few aberrations notwithstanding.
The spinning industry in India has truly emerged world class, with the youngest machinery installed among all the textile producing nations and with 30-40 per cent higher productivity than even China. The higher capital cost is therefore better absorbed by the Indian spinners as compared to their Chinese counterparts. Besides machine productivity, the Indian spinning industry has mastered the art of rapid training of workforce. With little support from the Government, the industry has been able to develop its own training manuals in most Indian languages and within three months prepare a world-class workforce, even out of uneducated, under-nourished farm hands.
It is little wonder then that yarn has been the most dominant growth driver among the various textile products exported, with its exports growing at a 30 per cent y-o-y in value terms. Should the few policy aberrations that creep in from time to time get resolved, investment in this evolved manufacturing sector will grow rapidly, particularly in States where cotton is surplus and attractive incentives are being offered.
Fabric exports
The fabric manufacturing sector too is ramping up capacities, and is currently able to produce much more fabrics than what is required by the domestic market and the exporters of ‘cut and sew’ products. The Government is further pushing investments in this sector.
On its part, Texprocil is stepping up the export promotion efforts for fabrics, both grey and processed. As a result of the persistent focus on exports of fabrics to China, we are today exporting fabrics to China, in addition to yarns. The focus in the coming months would be on other fabric importing geographies such as Vietnam, Sri Lanka, Cambodia and East EU to push up fabric exports.
Made-up exports are also progressing well. The capacity of the integrated units is growing well as they enjoy cost advantages over the decentralized ones. Once GST gets introduced, the higher costs suffered by the decentralised units on account of non-refund of State texes will disappear, and they will enjoy a level playing field. Post GST, decentralized units will, with their own working funds, emerge more competitive than the integrated units to meet the needs of smaller retailers across the globe.
Need for stable policies
Texprocil has always campaigned for stable policies. The policy framework advocated by it seeks access to international markets for all items, including raw cotton, in order to stay connected with global prices. It should be ensured that all sectors get their respective raw materials at slightly lower rates when compared to global prices and are able to access global prices. Export incentives should go up steadily from raw material (zero) to “cut and sew” (maximum) in order to encourage value addition. Focus market, incremental exports and drawback should be consistent across the value chain.
The recent policy aberration that penalized the most efficient sector supposedly to benefit a sector that has confessed its inability to stay competitive and its inability to train its workforce sends the wrong signals and needs to be restored without further loss of time. We need to restore confidence that policies would be made based on logic and data and not otherwise and that efficiency will never get sacrified at the altar of inefficiency.
Leveraging competitiveness
India’s competitiveness is growing as the world’s largest textile exporter as China is rapidly losing its competitiveness. China has currency appreciation, steep wage and power cost increase and rising cost of environmental compliance with major industry hubs reaching alarming levels of pollution, all of which are pushing down its competitiveness. Should India be able to negotiate favorable tariffs for the only manufactured product that China imports from India with a view to bringing down the unsustainable and embarrassingly high trade deficit of over $42 billion, it would open a new market for Indian fabrics and made-ups – a $8-10 billion market in two years. China’s is a $650 billion textile industry.
Japan and Korea, where India enjoys FTA advantage, need to be penetrated by showcasing our long-term viability. These countries look at long-term business relationship and would shift to India only if they see the Indian textile industry enjoying global competitiveness with stability. We need to get the Government’s commitment to reward and not peanalise competitiveness and efficiency before showcasing our competitiveness to gain rapid market share in these large textile importing countries.
Instead of looking at developing additional markets, in addition to the US and the EU, a focused approach in large markets where we have tariff advantages and price advantages, yet poor market share thanks to our image, would be the most rewarding. Image correction needs only a policy statement from the Government that we will have consistent policies, policies that will not seek to sacrifice the efficient at the alter of the inefficient. As a leading export promotion agency, Texprocil can do the rest.
This will also send the internal message to those who repeatedly make a virtue of their lack of competitiveness, despite all help from the Government, and make them start focusing inward to become globally competitive by adopting appropriate automation and mechanization. Win-win across the value adding sectors is a must if the textile industry is to reach its full potential.
Creating new jobs
In a country in which the largest employer ‘farming’ is shedding jobs since farm wages have shot up steeply, and farm mechanization is fast picking up with a higher utilisation of tractors and other equipment, the second largest employer ‘textiles’, needs to step up and create more jobs than those lost in the farming sector.
Textile entrepreneurs therefore have a duty to grow and absorb the youth who are thrown out of work in farms and the millions who join the workforce each year. Given its ability to absorb and train the uneducated and malnourished youth in Tier-3 and Tier-4 locations, a rapidly growing textile industry is the only answer.
Exporting the surplus textiles produced by our efficient textile entrepreneurs is also not a challenge as China which exports eight times more than India is facing strong headwinds.
In conclusion, textile entrepreneurs must therefore deem it their duty to steadily improve their efficiencies by adopting appropriate levels of automation and mechanization, learn from those who have managed to become more productive than even China and seek consistent policy support to encourage efficiency, as only textiles can provide jobs in a short time to the large number of job seekers who have no skills, no education and are malnourished. Exports will also reduce our CAD, another important national need.