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Bangladesh is a favourite talking point these days in Tirupur, the largest textile exporters’ hub of India, in a bid to woo back foreign buyers by playing the 'compliance' card. A close second is foreign investment in retail, with special emphasis on groups like Sweden-based Hennes & Mauritz (H&M) and America’s GAP wanting to enter the country. Cabinet nod to furniture major IKEA for setting up shop in India also generates interest, even though the company is not into garments and does not have a sourcing base in Tirupur, a town in Tamil Nadu also referred to as ‘Dollar City’, about 50 km from Coimbatore.
Battered by economic slowdown in Europe, long hours of power cuts at home, and closure of the dyeing units due to court diktat, Tirupur exporters, supplying knitwear and other cotton apparel to international brands like Walmart, H&M, Carrefour, C&A, Tommy Hilfiger and Marks & Spencer, are keenly tracking the developments around the recent collapse of textile factory--Rana Plaza--in Bangladesh. The topmost question on their mind is whether the Western chains would bring greater business to Tirupur, if they were to shift out of Bangladesh for lack of safety after one of the worst textile industry disaster leaving over 1,000 dead.
A Sakthivel, president, Tirupur Exporters’ Association, and a leading exporter, argued, “it was the fault of the international buyers that they kept their eyes shut to the Bangladesh factory situation just because they could source products 10% cheaper due to lower duties and labour cost.” Claiming that Tirupur units were "compliance-oriented", he said many of the Western buyers could perhaps purchase more from India after the Bangladesh disaster.
But despite the underlying glimmer of hope, many exporters on the condition of anonymity said international brands were unlikely to leave Bangladesh as the cost advantage was significant there. On top of that, Tirupur factories, which make up for around Rs 13,000 crore worth of exports annually, with Europe buying 65% of the total, are planning yet another price hike of around 7% due to the power crisis hitting their operational expenditure. In the past four years, the cost of production here has gone up by at least 50%, prompting global buyers to look for greener pastures, mostly Bangladesh.
A sourcing manager, not wanting to be named, pointed out that another price hike at Tirupur would certainly mean global buyers tilting more towards Bangladesh, irrespective of the problems there. “Ultimately, international chains want cheap products,” he said. Many of the top European brands of the world have decided to sign a pact committing to invest in building and fire safety in Bangladesh factories from where they buy apparel worth millions of dollar. American chains such as Walmart and GAP have resisted the move, saying they have their own safety mechanisms in place.
Bangladesh, which is the second largest garment exporter in the world after China, is steadily gaining market share due to its cheap labour, with monthly wages as low as $40 for a worker, against an estimated $200 in India and $150 in China.
On its sourcing strategy in the backdrop of the current developments, a Walmart spokesperson said, “the company does not release data regarding sourcing volumes by country. However, Walmart has been sourcing a variety of products from suppliers in India for more than 20 years and India continues to be an important sourcing market for us.” The spokesperson added, “India offers us quality products at competitive prices that are sold in Walmart stores around the world.”
Some other prominent international chains buying from Tirupur factories, including Germany’s Metro and Sweden’s H&M, did not reply to the questionnaire sent by Business Standard.
H&M, which is a reason for some cheer in this southern town for its proposal to enter India, is among the biggest buyers of apparel in Bangladesh. The Indian retail policy mandates all single-brand chains with FDI over 51% to setting up stores in the country to source at least 30% of their sales from India, which may mean better fortunes for the Tirupur industry too once the likes of H&M set up shop. Multi-brand chains have to buy at least 30% from Indian small and medium scale industries.
P Vaidyaprakash, among the very few exporters in Tirupur who agreed to talk, would like to believe that foreign investment in retail may change the fortunes of this textile hub that has fallen into bad times. Even the Bangladesh disaster may mean more business for this town, another exporter pointed out.
On impact of foreign retailers coming to India, TEA president Sakthivel said, “we already work with all the leading brands as they source from here.” Hopeful that foreign chains will buy much more than their mandatory 30% from India, he said, “yes, once they set up stores in India, exporters’ business will grow.” Even the trade unions in Tirupur are in favour of FDI in retail, though the Tamil Nadu government is opposing it, according to Sakthivel.
However, it is Kadarpet, close to Tirupur railway station, and known for its export surplus of branded clothes, that buzzes with activity through the day. As for the textile units, around 1,000 or so while not counting the ancillary ones, international buyers’ trips have reduced, compared to the heydays of 2010, when exports from here had hit the magic figure of Rs 13,000 crore, and has not moved up from there since then. That explains why exporters don’t want anything to go wrong and let the association president do the talking for all. Bad international press over under-age labour and low wages has made them even more wary, prompting some of them to display 'no child labour’ boards on factory gates.
An exporter measured the decline of Tirupur business with the time taken to travel from Coimbatore, which has the closest airport. “Till some months ago, you would have taken over two hours to reach. Now you take half the time.” The traffic jams and honking vehicles are rare while entering Tirupur now. No wonder that the next generation here is determined to go for software jobs with handsome salaries, or get into real estate business which holds much better promise than spinning yarns. Redundant mills, with acres of land all around the town and on the outskirts, may just be the starting point for their realty ambitions to take off.
