Globalization In The Apparel Industry: A Study of Preparedness of Indian

Industry

Dr. Pradeep JoshiAsso. Prof.,NIFT, New Delhi

Dr. S.M IshtiaqueProf., IIT, New Delhi

Dr. Sudhir JainAsso. Prof., IIT, New Delhi

77thth IFFTI Annual Conference 2005 at Bunka University ,Tokyo, Japan IFFTI Annual Conference 2005 at Bunka University ,Tokyo, Japan

Trade Restriction on Textile and Clothing

The Cotton Arrangements (1961-1973)

The Multifibre Arrangement (1974 – 1994)

Agreement on Textiles and Clothing (1995 – 2004)

WTO Era- 1st Jan 2005 onwards

• The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974.• The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas. • The Agreement on Textiles and Clothing (ATC) mandated progressive phase out of import quotas established under MFA &• The integration of textiles & clothing into the multilateral trading system before January 2005.

Year 1990 1995 2000 2003

Textiles 104354 152319 154366 169422

Clothing 108129 158353 197498 225940

Total world trade in Textiles & Clothing

( value in US$ Millions)

Source: WTOSource: WTO

Leading exporters of clothing

  2003 % Share

China 52.06 23.0

EU 19.04 8.4

Turkey 9.93 4.4

H.Kong 8.20 3.6

Mexico 7.34 3.2

India 6.45 2.9

USA 5.53 2.5

Bangladesh 4.32 1.9

Indonesia 4.10 1.8

Romania 4.06 1.8

Source: Compiled from WTO data

Leading importers of clothing

  2003 % share

USA 71.27 31.5

EU 60.39 26.7

Japan 19.48 8.6

H. Kong 15.94 7.0

Canada 4.50 2.0

Switzerland 3.92 1.7

Russia 3.71 1.6

Mexico 3.03 1.3

S. Korea 2.49 1.1

Australia 2.10 1.0

Source: Compiled from WTO data

TRENDS IN WTO ERA

Imports 2004 2005 change % change

WORLD 35,466 38,827 3,361 9.48%

TOP TEN COUNTRIES:

CHINA 3755.49 7403.97 3648.48 97.15

MEXICO 3,879 3,633 -246 -6.34%

HONDURAS 1,516 1,530 14 0.89%

BANGLEDESH 1,056 1,284 228 21.54%

SALVADOR 967 956 -11 -1.18%

VIETNAM 1,454 1,440 -14 -0.95%

DOM REP 1,133 1,086 -46 -4.10%

INDONASIA 1,386 1,595 209 15.06%

INDIA 1117.44 1537.52 420.08 37.59

(Source - Compiled from US DEPARTMENT OF COMMERCE, OFFICE OF TEXTILES AND APPAREL)

Apparel imports to US market( January- June, 2005)

US MARKET (Jan-June 2005 over corresponding period in year 2004.)

Import of apparel in US market has increased by 9.48%.

There is tremendous growth in imports from

China(94.33%)

India(34.44%),

Bangaladesh(21.54%)

Negative growth in imports from Mexico,Dominian

Repubic etc.

Apparel imports into US: Competitive scenarioQty in million Metre square value in US$ million

FromJan-Jun 04 Jan-Jun 05 % change

Qty value Qty value Qty value

India 312.7

1117.44 413.75 1537.52 32.31 37.59

China 1229

3755.49 2769.14 7403.97 125.1 97.15

Bangladesh 425.0

858.82 512.90 1054.03 20.66 22.73

Pakistan 237.4

497.00 265.18 551.66 11.69 11.00

Sri Lanka 190. 678.44 225.45 795.99 18.39 17.33(Source: Compiled from trade data)

Competitive position in US market

China is highest gainer of phasing out of quotas in US market with 125.19 % growth in volume and 97.15%(value).

The imports from India have increased by 32.31%(quantity) and37.59%(value).

The other gainers of WTO era are Bangladesh (22.73% value growth) followed by Sri Lanka (17.33% value growth) and Pakistan (11% value growth).

Apparel Imports to EU market

Apparel type

Jan-Jun 04 Jan-Jun 05 % change

Knitted 10235.02 9881.72 -3.4

Woven 13204.94 12878.82 -2.4

total 23439.96 22760.54 -2.9

(Value in million Euro)

(Source: Compiled from trade data)

EU Market (Jan-June 2005 over corresponding period in year 2004.)

The trends in EU market reflect a decrease

of (2.9%) in imports.

The negative import is seen in knitted (-3.4%)

as well as woven (-2.4%) apparel.

Apparel import into EU from India

Apparel type Jan-Jun 04 Jan-Jun 05 % change

Qty Value Qty Value Qty Value

Knitted 54.99 627.2 65.83 688.9 19.71 9.84

Woven 40.26 736.1 42.87 872.5 6.48 18.53

total 95.25 1363. 108.7 1561. 14.12 14.53

(Value in million Euro, quantity in million kg)

(Source: Compiled from trade data)

Position of India in EU market

The imports from India has increased by 14.12%(qty) and 14.53(value).

The growth in imports is 19.71%(qty) for knitted and 9.84%(value) while there is growth of 18.53%(value) for woven apparel imports in EU during this period.

Import of knitted apparel has increased in quantity while woven apparel have better growth in EU imports in value.

Apparel import into EU from other Asian Countries

Apparel type Jan-June 04 Jan-June 05 % change

Bangladesh Knitted 37.17 59.30 59.6

Woven 70.34 76.70 9.1

107.51 136.00 26.5

China Knitted 212.92 312.77 46.9

Woven 300.52 467.81 55.7

513.44 780.58 52.03

Pakistan Knitted 11.94 11.30 -5.3

Woven 7.85 7.46 -5.0

19.79 18.76 -5.2

Sri Lanka Knitted 5.83 5.59 -4.1

Woven 12.19 13.34 9.4

total 18.02 18.93 5.0

(Euro mn, qty mn kg)

(Source: Compiled from trade data)

The imports from China have increased by

52.03%(value) followed by Bangladesh

(26.5%(value) and India.

The imports from Sri Lanka have increased

marginally(5%) while imports from Pakistan

have decreased by 5.2%

Competitive position in EU market

Summary……

India & China are biggest gainers in WTO era

Import patterns are set to change in favour of

Asian countries.

INDIAN APPAREL INDUSTRY: OVERVIEW

Indian Textile & Clothing in World Trade

2.092.5 2.78

3.132.81 2.78 2.9

3.473.82 3.67 3.53 3.8

2.882.34

0

1

2

3

4

5

1990 1995 1999 2000 2001 2002 2003

% S

hare

% Share of Clothing % Share of Textile

Source: Compiled from WTO

India has 3.8% share in world textile & 2.9% in clothing trade.

India’s Clothing Exports

891.7

1559.82069.9 1895.3 1950.9 2031.1

1645.2 1723.7 1908.6 1816.6 1960.12421.6

0 198 259.1 226.7 193.3 189.8

2552.5

3593.2

1533.6

640.3305.6 231

3466.6

5048.7

5765.2

4542.9 4409.94873.9

0

1000

2000

3000

4000

5000

6000

7000

1993 1998 2000 2001 2002 2003

Years

(Mn

Us$

)

USA EU Canada NON - QUOTA COUNTRIES Total

Source: compiled from AEPC Handbook of Statistics.

The exports of clothing is increasing with increase in share in EU and US markets . EU & US are the largest market of clothing exports from India

UVR of Clothing Exports

6.02 5.95 6.1 5.755.25 4.95

4.054.564.15 4.54 4.3

3.76 3.5 3.41 3.68 3.794.9 5.2 5.1

6.45 6.8 6.957.84

8.518.72 9.1 9.58.3

7.66.85

5.52 5.654.75 4.86 5.29 5.26 4.85 4.36

5.14 5.25

11 10.85 11.210.38 10.2 10.5

9.2610.1

3.96 3.74 3.78 3.65 3.81 3.5 3.71 4

0

2

4

6

8

10

12

1996-97 1997-98 1998-99 1999-2000

2000-01 2001-02 2002-03 2003-04

Years

US

$ p

er p

iece

Gents Shirt T- Shirt Ladies Blouse/Shirt

Trouser/Short Ladies Dresses Ladies Skirt

Jackets/Coats Avg. UVR

Average UVR of clothing exports from India is around $ 3.5.

Source: compiled from AEPC Handbook of Statistics.

Productivity Levels of Clothing Firms

0

5

10

15

20

25

Ladies blouses Gents Shirts Ladies Dresses Ladies Skirts Trousers

Categories

(No.

Of

Pie

ces/ M

ach

ine /

Day

)

Hong Kong Taiwan Thailand China India (CII study)

Source: CII Accenture “Textile Industry: Road to Growth” Report- 2002

The productivity for most of the clothing items is relatively low in India. Hong Kong, Taiwan, China are having much higher productivity than India

Summary

• Increasing percentage share of clothing in world trade

• Indian textile & clothing trade is concentrated more on

textiles

• EU, China are leading exporters of clothing.

• EU, US and Japan are leading importers of clothing.

India’s trade is for low value items in clothing

Productivity levels as well as investments in clothing

firm are relatively low in India.

With integration of textile and clothing trade into WTO,

the trade is going to be liberalized.

Increasing competition, decreasing prices, shifting

trade pattern are expected in post MFA scenario.

Sample Size

Garment Exporters 145

Fabric Manufacturers 69

Buying Houses 38

Primary data collection was done through response of

garment exporters, fabric manufacturers and buying

houses using three separate structured questionnaires.

Research Design

COMPETITIVENESS OF INDIAN APPAREL

INDUSTRY: SURVEY FINDINGS AND

ANALYSIS

0

10

20

30

40

50

60

70

Below $4 $4--$8 $8--$12 $12--$16 Above $16

Per

cen

tag

e o

f R

esp

on

den

ts

Ladies Blouse Gents Shirt Ladies Dress Ladies Skirt

Trouser T-Shirt Jacket

Average Price (FOB) for Different product Categories being Exported

or Sourced from India

(Response of Garment Exporters)

Average Price (FOB) for Different Product Categories being exported

or Sourced from India

0

10

20

30

40

50

60

Below $4 $4--$8 $8--$12 $12--$16 Above $16

Pe

rce

nta

ge

of

res

po

nd

en

ts

Ladies Blouse Gents Shirt Ladies Dress Ladies Skirt

Trousers T-Shirts Jackets

(Response of Buying Houses)

Productivity Level for Clothing Firms( Response of Garment Exporters ) )

Productivity of garments (pieces/machine/day)

0

10

20

30

40

50

< 4 4--8 8--12 12--16 >16

% o

f re

spo

nd

ents

Ladies Blouse Gents Shirt Ladies Dress Ladies Skirt

Trouser T-Shirt Jacket

REASONS FOR LESSER FOCUS OF INDIAN

EXPORTERS ON EXPORT OF HIGH VALUE

ADDED PRODUCTS FROM INDIA

Perception Difference between Buying Houses & Garment Exporters

Limited R&D facility

Limited f inishing facilities

Qutoas are not available

Unfavourable cost competitveness

Diff iculty in importing raw material

Technological Constraints

Raw material not readilty available

India is primarily know n for basic

products

Inadequacy of w orkers w ith required skills

Req. design skills are not easily

available

Lesser demand in international market

Diff iculty in locating the destination

market

0.00

1.00

2.00

3.00

4.00

5.00

Buying House Garment Manufacturer

Indian Textile Industry: Overview

Sector-Wise Production of Cloth

45333544 2589 2019 1670 1546 1496 1434

3109 4135 4295

7202 7506 75855980 54944802

9534

13348

17201

2380325192 26109 26947

0

5000

10000

15000

20000

25000

30000

1980-81

1985-86

1990-91

1995-96

2000-01

2001-02

2002-03

2003-04

Years

(Million

sq

. m

trs)

Mill Handloom Powerloom

Source: compiled from Compendium of Textile Statistics

The production of fabric from powerloom has increased while that from mill sector has reduced in last two decades.

Fibre Mix

42 46

8676

58 54

1424

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Internationaldemand

India – Domesticconsumption

India – Exports India – Production

Cotton MMF

Source : KSA Analysis , 2000

The international demand of textile is more of MMF while the production as well as exports from India are of Cotton indicating a mis-match.

PERCEPTION ON AVAILABILITY OF

FABRIC FROM VARIOUS SOURCES

Consumption of Imported Fabric

18.3232.06

45.8

0

20

40

60

%

100% >50% < 50% Nil

Response of Garment Exporters

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

100%Cotton

100% ManMade

100% Silk 100% Wool Blends

Italy

Japan

Malaysia

Taiwan

S.Korea

China

India

Response of Buying Houses

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

100%Cotton

100% ManMade

100% Silk 100% Wool Blends

Taiwan

S.Korea

China

India

Summary

• Indian Clothing industry primarily caters to lower end

of the market.

• The clothing manufacturing in India has lower

productivity

• Indian clothing manufacturing industry is less

competitive due to lower productivity, less research and

development effort, technology, non-availability of

finishing facility and is not being able to move up in the

value chain.

The unfavorable cost competitiveness is also caused due to

non-availability of raw material (fabric) particularly MMF

which is being increasingly imported from China, Taiwan

and Korea.

The increasing import of fabric is not only affecting the cost

competitiveness of Indian clothing industry but it is also

affecting textile (fabric) industry

INITIATIVES TO BE TAKEN TO FACE

COMPETITION IN INTERNATIONAL

MARKET

Comparison of Responses from Garment Exporters & Buying Houses

Extensive marketing of the

product

Need for consortium of

manufacturers

Product specialization

Investment into latest technology

Increasing of product capacity

Add backward/forward

linkage

Focus on better source of raw

material

Focus on product development and

design

Launch own Brands

Diversification into new product

categories

0

1

2

3

4

5

Garment Mfg Buying Houses

To Conclude…….

• To face competition in WTO era the focus on product

development & design is needed which requires

investment into latest technology & focus on better

sources of raw material.

• Clothing manufacturers are required to make efforts for

changing the perception of being producer of basic items.

• Product specialization is required to be built up. The

need is to have specialization in knits along with woven

• New markets (besides US & EU) are to be explored

• Indian fabric is preferred for 100% cotton, while for

synthetics China, Taiwan & Korea are becoming

sourcing base due to cheaper price and superior

quality. The requirement of clothing industry is for

consistency in quality and quantity, wider width and

lower cost.

…Contd

• India’s fabric sector needs to become competitive

by investment in latest technology.

• The government also needs to intervene by having

a competitive policy framework in tune with other

competitive countries in the world.

…Contd

Thank You!

Dr.Pradeep JoshiDepartment Of Fashion Management Studies

National Institute of Fashion TechnologyNew Delhi

Email : pradeepjoshi @niftindia.com