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TEXTILES INTELLIGENCE - Sourcing Apparel from the Indian Subcontinent: An Alternative to China?

By Robin Anson, managing director, Textiles Intelligence Limited, UK

With Chinese exports once more restricted by quotas, buyers in the European Union and the United States are turning to the South Asian countries of Bangladesh , India , Pakistan and Sri Lanka to fill the gap. But with quotas in some cases likely to be in place until the end of 2008, buyers are questioning whether South Asian countries will be able to provide a suitable alternative to China in terms of quantity, product assortment, delivery times and quality.



In 2005, the European Union and the United States implemented comprehensive quota agreements aimed at limiting surges in textile and clothing imports from China. The surges followed the final elimination of global quotas at the end of 2004, after a ten-year phase-out process that started at the beginning of 1995.






FOCUS ON INDIA : HOW COMPETITIVE IS ITS TEXTILE AND CLOTHING INDUSTRY?

Labour costs
Hourly labour costs in India are among the lowest in the world. At only US$0.67 in 2004, they were significantly lower than competitors in the EU and US markets such as Taiwan (US$7.58), South Korea (US$7.10), Czech Republic (US$3.94), Turkey (US$2.88), Morocco (US$2.56), Mexico (US$2.19), Tunisia (US$2.05), Thailand (US$1.29), and the Philippines (US$1.12). They were also lower than in China 's coastal region (US$0.76). Admittedly they were higher than in Indonesia (US$0.55), inland China (US$0.48), Sri Lanka (US$0.46), Pakistan (US$0.37), Vietnam (US$0.28), and Bangladesh (US$0.28). However, such differences are easily overshadowed by differences in other costs and productivity levels.

SWOT ANALYSIS FOR INDIA : STRENGTHS, WEAKNESSES, OPPORTUNITIES AND THREATS

  Strengths

  • India has an abundant domestic raw material supply. It is number three among the world's raw cotton producers, and is a significant manufacturer of manmade fibres.
  • It has a strong and diversified textile manufacturing base.
  • The country has a large domestic market as well as a large and rapidly growing consumer market, enabling its manufacturers to achieve economies of scale.
  • Labour costs are minimal.
  • India has a large and growing economy, and one which ranks as the world's number four in terms of purchasing power parity.
  • India has a vibrant capital market.
  • The country has a good strategic location, being close to the vast South Asian market.
  • India has a large pool of skilled manpower and one of the world's largest pools of professionals.
  • The industry is exempt from customs duty on industrial inputs, and benefits from corporate tax holidays for 100% EOUs (export oriented units) and EPZs (export processing zones).
  • India has a stable parliamentary democracy, unlike many other low cost suppliers around the world.
  • The availability of cloth per head in India is growing.
  • The development of IT and communications in India has been rapid.
  • India 's foreign currency reserves are growing.
  • Gradual progress is being made on structural reforms.
  • Industrial cluster formation is taking place in certain cities.
  • The first fully operational apparel park has opened in Netaji-Tirupur and more are to follow.
  • India has a number of well recognised textile and fashion training institutes.
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