Hong Kong textile eye India as alternative production base to cut cost

In recent years, the sustained rise in production costs on the Chinese mainland has eroded the profit margins of many Hong Kong companies with labour-intensive factories located on the Chinese mainland, prompting them to seek alternative production bases elsewhere.

India is rising as a new choice of relocating labour-intensive industries from China and also as a retail market of good potential, according to reasearch report by The Hong Kong Trade Development Council (HKTDC).

Hong Kong as the gateway for Indian companies to the Chinese markets, the HKTDC is promoting India as an alternative manufacturing base for its industries based in China.

According to HKTDC reports, while Southeast Asian countries offer many options, India offers many advantages as an alternative production base, along with the added advantage of having a domestic market of great potential.

India was the world’s second biggest exporter of textile and garment products in 2014, shipping goods worth $36 billion, behind China’s exports worth a whopping $399 billion.

The report also cites the lower import tariff levied on Indian goods by the US and the European Union (EU). India has been an active player in Asia, securing free trade agreements (FTAs) inside and outside the region. India has also been in talks on an FTA with the EU.

Despite this, many big Indian exporters have successfully lined up with international buyers, including department stores, retail chains and brands.

With advantages of raw materials and prospects of vertical integration, India is a strong garment exporting country and a location worth considering for factory relocation in relation to labour-intensive manufacturing, such as garment-making.

Further, US import tariff rates for Indian yarn-related products range between zero percent and 2.7 percent. The weighted average import tariff rates of the EU and US on non-agricultural products from India are 4.5 percent and 2.5 percent, respectively.

The report pointed out that while China is the undisputed world leader in exporting textiles and garment products, many have overlooked India’s position as the world’s second biggest exporter of textile and garment products in 2014, selling a total of $36 billion, during the year, far behind China’s $399 billion.

India stands out to be a substantial exporter in both garments and textiles. For textile exports alone, India was second after China in 2014, with a share of 5.8 per cent of the global market, compared to China’s enormous 35.6 per cent share.