India is losing out in the race for a greater share in the global apparel market to countries such as Cambodia, Indonesia and Vietnam being relinquished by China. It needs to reduce duties on import of manmade fibre and increase productivity by helping firms grow in size with less complex labour policies, according to World Bank report entitled entitled â€˜Stitches to riches? â€” apparel employment, trade and economic development in South Asiaâ€™ on Thursday.
Onno Ruhl, World Bank Country Director, at a press conference at the launch of the report said that free trade pacts like the Trans Pacific Partnership (TPP) between the US and 11 other Pacific rim countries would benefit competing countries such as Vietnam.
Ruhl further added that the Indian garments industry, too, could gain if the country became part of the TPP, but it is for India to decide, keeping other things in mind.
As per the report, a reduction in tariff and non-tariff barriers (among TPP members) could lead to trade diversion for South Asia, including in the textiles and apparel sector.
As wages increase in China, the largest apparel manufacturer for the last 10 years is expected to slowly relinquish its lead position and give an opportunity to India and other South Asian countries to grab some of its share. Even a 10 percent increase in Chinese apparel prices could create at least 1.2 million new jobs in the Indian apparel industry.
A one percent increase in Chinese apparel prices could increase EU demand for Indian apparel exports by 1.9 per cent and US demand for Indian apparel by 1.46 per cent.
Although the report finds that India has maintained its share in the world market, it needs to do better and grow fast to create more employment.
For that to happen, India needs to remove barriers in the import of manmade fibre to encourage production of garments made of fabric other than cotton.
In India the focus is on cotton, but the world demands garments made of manmade fibre as well. India has to tap into that demand by lowering import duties, pegged at 10 per cent, said Gladys Lopez-Acevedo, co-author of the report.
The report said that India needs to attract more FDI into the sector by helping firms grow in size (by tackling complex policies) and also by increasing integration in the fibre-textile-apparel supply chain.
To increase productivity, the government could help firms enter the formal sector and take advantage of economies of scale with less complex labour policies.
As South-East Asian countries are also outperforming India on non-cost factors that buyers care about, such as quality, lead time and reliability and social compliance sustainability.
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