PHASE-OUT of quota system has created opportunities for the Indian textile sector to expand in international & domestic markets with updated capacities. The sector now has comparative advantage over its competitors on availability of relatively low-cost and skilled workforce, design expertise and raw materials base. However, unlike expectations the sector has only been able to partially exploit the opportunities provided by the market. The weaknesses have continued to deteriorate the standards of the sector. "Quota-free market could not be exploited because of limited market penetration and mixed product basket, value realisation gap, fragmented product base, and uncompetitive cost of Indian textiles & clothing sector," says Ashok G Rajani, Chairman, Export Promotion Committee (AEPC). The highly fragmented units have production capacities, which are low in international standards. "The industry operates at low economies of scale, totally depending on outsourcing back material. This results in inconsistent incoming raw material quality & poor product quality. However, this has lead to a separate back process industry in weaving," says AN Desai, Director, Bombay Textile Research Association.
In addition, the sector lacks in international business practices and industrial engineering concepts. "The level of weaving technology is of lower order and knitting units do not possess capacity to perform dyeing, processing and finishing to international standards," states Dr Vaijayanti Pandit, Director, Federation of Indian Chambers of Commerce & Industries, Western Regional Council.
What restricts product development and synthetic base is the high emphasis on cotton. "While elsewhere fashion preferences are dictating 60% usage of man-made fibres compared with 40% of cotton, in India the reverse is true. Therefore, in the export sector, India misses on many opportunities where man-made fabric is preferred," adds Dr Pandit. Also, the additional costs in terms of power, transaction and cross subsidy are higher. "The sector faces high manufacturing cost due to lower efficiency, higher power & utilities costs and weaker infrastructure," says GV Aras, President, Textile Engineering Group, ATE Marketing Pvt Ltd, Mumbai. Additional costs have proved to be the major crisis. "Increasing market aggression by China, increasing power costs, lack of proper infrastructure causing delays & appreciating rupee are some of the threats," adds Mr Aras.
Other threats include pricing & quality competitiveness determined by raw materials & efficient logistics. "For example, yarn is produced at Coimbatore, fabric at Tirupur, chemical processing done at Surat, garment manufacturing at Bangalore; this cannot help in long run," says Arindam Basu, Director, The South India Textile Research Association. Despite weaknesses, there are strengths that would help the sector to efficiently play the 'volume game'. "The industry has ability to produce small lots to meet frequent change in market requirements. This is possible due to small size of operations & flexibility in production," says Dr Desai.
The sector can handle value addition, adequate labour supply at comparatively low wages and expanding domestic & international market. "The major strengths of Indian textile sector are availability of raw material, comparatively cheaper workforce, skilled manpower, technically qualified persons & ability to produce high quality small lot products," says Mr Basu. The market provides many opportunities for the SMEs in terms of understanding buyers' needs and preferences, R&D models and improvements in infrastructure and regulations. "With the opening of world markets, Govt. policies to support textile industry, policy to put up textile parks, US & EU buying houses looking at India as an alternative to China to cut down dependence and TUF (Technology Upgradation Fund) with interest subsidy to give impetus to investments; opportunities seem endless for our sector," says Mr Aras. The situation has also pushed Indian brand overseas, increasing the scale of exports and market share. "The free quota market has endowed the sector with availability of free markets, increased exports, enhanced quality, brand recognition abroad, more investments in the different sectors of the value chain for upgradation & large scale state-of-the-art manufacturing over fragmented outdated batch manufacturing," he adds.
While the current scenario provides greater market access for SMEs, there is a need for capacity building. This can only be aided through clusters, which develop linkages between SMEs. "The advantage comes from a much greater bargaining power, better prices from machinery & accessory suppliers and short lead times," says Hitesh Mittal, Sr. Consultant, Technopak. Cluster development activities support technology upgradation, enhance quality & offer product diversification. "This approach helps in analysis & intervention. Interventions focussing on restructuring the chains in terms of developing distribution channels, forward & backward linkages, design inputs and policy factors have been instrumental in consolidating the position of textile SMEs in the global value chain," says DP Jadeja, Director & Coordinator (CDP), Textiles Committee, Mumbai.
"Establishment of textile venture fund, of Indian brand through financial support & of industry standards are some of the actions need to be taken by the Govt. and exporters for exploiting post-MFA market," says Mr Rajani. The policy makers should replace archaic labour laws with welfare regimes. "SMEs need to invest in fresh operators. The need is to open more training schools at grass root level," says Mr Mittal. The approach should generate demand through trade promotions creating a global position for the Indian textile sector.