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India is not much behind in capability, what we lack is scale: Gokaldas MD

Self-dependence should be interpreted as producing high quality goods required for Indian and global consumption in India with as much value addition as possible in the country, he said

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Gokaldas Exports | Manufacturing sector | textile industry

T E Narasimhan  |  Chennai 

Sivaramakrishnan Ganapathi, Gokaldas exports, MD
Imports of synthetic textiles and technical textile products are showing growth. Almost all other product types are either stagnant or declining.

Sivaramakrishnan Ganapathi, managing director of India’s largest apparel exporter, Gokaldas Exports, tells T E Narasimhan that dependence on China will automatically reduce when economic or strategic logic is associated with it

The prime minister has mooted self-dependence as the new manufacturing mantra for the Indian industry. How will this affect you?

Self-dependence is a good mantra for any industy. At a macro level, it is never individual firms but the entire manufacturing ecosystem that competes. China has one of the most robust “aatmanirbhar” (self-reliant) manufacturing ecosystem that serves as a worthy example of industrial leadership. They have the entire value chain, producing practically all kinds of fibre, fabric and trim types to quality and scale that provides a strong supportive ecosystem for apparel manufacturing.

India is not much behind in terms of capability, but we lack scale. The textile value chain is well-developed in India and that is primarily the reason why India has robust apparel exports of approximately $16 billion a year. Availability of good quality cotton; besides presence of viscose and polyester fibre mills; and spinning, weaving and processing units across several industrial clusters make India an attractive destination for apparel manufacture.

The apparel world is complex and seasonal. There are product types that require special fabrics and trims that are still not produced in India. Indian apparel manufacturers have a choice of either importing those raw materials from other countries, including China, or not participating in those opportunities. In the interest of continued development of the industry, world trade in raw material should continue so that value addition can be done in India.

Self-dependence should be interpreted as producing high quality goods required for Indian and global consumption in India with as much value addition as possible in the country.

How much does the depend on Chinese imports? As anti-China sentiment is increasing, is it possible to reduce the dependence on China?

The key question to ask is whether we want to completely replace global inputs at the cost of economic advantage of scale. The industrial ecosystem is still largely dependent on China for certain coated fabrics, special trims etc. While the technology is available, the challenge is capacity and quality. Industrial capacity creation needs investment appetite and a gestation period. While eliminating dependence on China is possible with time, the strategy should really be to reduce reliance on China. As a country we need not replicate everything done in China, but focus on adding value in India.

Which products are imported from China by the

A wide variety of textile products are imported from China. Even the tapes used for sealing PPEs manufactured in India are imported from China, though now we see some local producers entering to fill the gap. Imports of synthetic textiles and technical textile products are showing growth. Almost all other product types are either stagnant or declining.

The prime minister has been talking about reducing imports from China. Do you see the government taking measures to reduce it? What needs to be done, especially to create the supply chain?

Talking about it is the starting point. Getting it done follows. The sentiment about minimising dependence on China is growing in India and we need to respect that.

Creating industrial supply chains however requires time. The immediate focus needs to be on creating capacity in strategic and critical items like telecom equipment, electronic components and so on rather than frittering away our energy on replicating all that is manufactured in China.

Why is India or India Inc still not able to do backward integration?

China always had advantage in terms of cost of capital, lower cost of utilities, indirect subsidies, active government support to chosen industries — all of which lead to a formidable competitive advantage. The Chinese labour force is educated, disciplined and hard-working. They have an abundance of engineering talent, which anchors their industry. China has invested in building infrastructure, which ensures efficient movement of goods globally, which are vital for manufacturing success. Lower cost of capital and state support lowers project risk. Leveraging all of these, they have built capacities across sectors to a scale that is unprecedented in the world.

India is a highly entrepreneurial country and Indian entrepreneurs would enter any business where there is an opportunity to make economic surplus. We have the technical talent as well. Backward integration typically requires a higher level of investment and scale. Examples abound where Indian industry has built world-class manufacturing. In the textiles space for example, India produces some of the finest denims and that too sustainably. We have some ways to go in building the “surround systems” that provide enduring manufacturing preeminence.

Chinese companies have started investing outside China in countries like Indonesia, Bangladesh etc. Do you think that they will come to India also; has the trend started?

We see Chinese investments in white goods in India. As for textiles they still play the China plus one strategy by keeping the capital and knowledge intensive parts of the textiles value chain in China and moving apparel manufacturing to neighbouring countries, which have labour cost advantage. This way lead time considerations can be addressed, while capital investments are optimised.

Further, China has invested in countries, which have large apparel manufacturing bases like Bangladesh and Vietnam, which enjoy duty-free access to large Western markets. India does not offer such an opportunity for now.

What has been the experience of Gokaldas; have you reduced the dependence on China?

We are always looking at working with our Indian suppliers to develop high-value internationally-sourced (including China) raw material in India, and have been reasonably successful at it. Our dependence on China for certain product types continues. Our endeavour is always to reduce the cost of supplies and more importantly cut down the lead time for obtaining them. Reduction of import dependence stem for such considerations.

What will be your suggestions to the Indian garment units to reduce Chinese dependence? How can it help them? Which segment should they focus on to be competitive in the global market and to tap the domestic market?

Businesses are run to maximise returns to all its stakeholders. Reduction in dependence on China will automatically happen if there is an economic or strategic logic associated with it. To compete with some of the structural advantages that China has, India needs to encourage large global retailers to buy more from India. Capacities will be built across the value chain when there are right investment incentives, competitive cost of capital and matching logistics infrastructure, some of which take time to deliver. In the meanwhile, free trade agreement with select large countries will spur the industry with a distinctive factor advantage.

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First Published: Sat, June 27 2020. 22:00 IST
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