Inadequate incentives, excessive emphasis on cotton fibre and handlooms by the government, flip-flop in raw material policy, faulty duty structure in the man-made fibre segment are some of the major constrains for the growth in apparel and textile sector in India. Imports of certain raw materials (like PTA) are taxed higher than those of finished products and inflexible labour laws are added hindrances facing by the sector.
An analysis of export trends of key nations shows that while the average annual growth rate of Chinese textile and clothing exports slowed to 6.1% since 2012 (it was as high as 20.1% in 2011), India has managed to perform only a tad better, with an average expansion rate of 8.2% in the last three years.
With China gradually shifting from labour-intensive industries (like garments) to capital-intensive ones due to soaring wage costs, India is unlikely to capitalize on that opportunity if it fails to address the structural issues plaguing the sector at the earliest.
Vietnam, however, clocked an impressive 15.8% growth rate in its T&C exports since 2012. Even Bangladesh, despite facing an international backlash for poor labour standards following a number of tragedies at its garments units resulted in some global retailers cutting down on their garment orders, managed to perform decently with a 7.8% growth rate since 2012.
India has failed to take advantage of a slowdown in China’s textile and garment exports as also persisting global concerns about violations of labour norms in Bangladesh in recent years, while tiny Vietnam seems to have emerged as the largest beneficiary.
A vision document, aimed at raising the country’s textile and clothing exports, including handicrafts, to 300 billion US Dollar by 2024-25 from the current 41 billion US Dollar, is still waiting to be taken up by the cabinet, even 10 months after the Ajay Shankar panel had submitted it.
The withdrawal of certain export incentives in the recently-announced foreign trade policy 2015-20 is going to make it even more difficult for domestic exporters.