globalization in the apparel industry: a study of preparedness of indian industry dr. pradeep joshi...
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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
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