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| Fixing the warp | | Even Bangladesh exports more apparel than India |
| Business Standard / New Delhi Jan 04, 2010, 00:14 IST |
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When the global textiles market was opened up with the abolition of the MultiFibre Agreement in December 2004, many thought India’s textile exports would surge once import quotas in developed countries were removed. There was another lot, however, who were convinced India’s legendary problems would ensure this never happened. In the end, textile exports did rise, but nowhere near potential, and not even well by India’s own standards. Exports of textiles and apparel rose from $11.5 billion in 2000 to a little over $21 billion in 2008, a period during which India’s exports rose three-fold — as a result, the share of textiles and apparel in India’s overall export basket has more than halved. To make things worse, Bangladesh now exports more apparel (in 2008, both countries exported the same amount, at $10.9 billion) than India and, in all likelihood, even Vietnam may overtake India any day now (it exported $9 billion in 2008) — in the case of textiles, though, India still leads (It exported $10.3 billion in 2008 as compared to Bangladesh’s $1.1 billion). The usual reasons of labour laws and poor infrastructure are to blame — with retrenchment of labour not allowed, garment producers prefer to retain dozens of smaller units, and while this helps them avoid the problems associated with retrenchment, it also ensures they do badly on critical parameters like delivery time, turning around of export orders and so on. With China scoring the best on such parameters, needless to say, it benefited the most from the opening up and Chinese exports of textiles and apparel rose from $52 billion in 2000 to $185 billion in 2008.
Given the importance of the sector in the country’s exports as well as employment, it is surprising the government has done so little to fix things. The industry’s proposal, along the line of the National Rural Employment Guarantee Scheme (NREGS), for instance, was never considered by the government — the industry proposed it be allowed full flexibility in hire and fire of new labour if it promised them work for 200 days a year, or double that promised under the NREGS. This would allow industry to hire for demand cycles without creating permanent liabilities. Similarly, while the interest subsidy the government gave under the Textile Upgradation Fund Scheme has seen over Rs 100,000 crore of loans being taken, the government has not been able to pay the subsidy since June 2009 — apart from meaning the industry has to fork out Rs 650 crore a quarter, it slows down the pace of further modernisation. While the government has not banned cotton exports as has been demanded by apparel units that benefit from the lower prices, it has not moved on the sensible suggestion given by industry — since a lot of speculative export contracts were being booked and this resulted in a hike in cotton prices, industry demanded the government insist on performance bank guarantees before allowing such contracts to be booked. Nor has much action been taken on other fronts like increasing working capital loans or raising government subventions to match those of competitor countries. A sensible policy would take into account the costs of creating job security under NREGS type of programmes and weigh these against what industry is promising in terms of additional employment.
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