India has been edged out of the list of top five suppliers to the US apparel market.
Taking advantage of a weakening Chinese stranglehold over global textile markets, Vietnam, Indonesia and Bangladesh have steadily grown their market share this year. This, even as Indian suppliers have struggled to keep up with the competition.
US Government data shows that during January-April this year, Vietnam and Indonesia inched up to the number two and three positions. This is mainly attributed to a spill-over of Chinese investments in these two countries, as well as other Asian nations such as Cambodia, in the wake of a spike in labour costs in mainland China and a continuing power crunch.
Bangladesh comes in fourth, with an over 30 per cent growth recorded in the four months. While Mexico is slowing, India's exports to the post-recession US apparel market are growing below the scorching pace set by its Asian competitors.
In the EU clothing market too, Bangladesh is gaining market share relinquished by China. In the US home textiles market, India has managed to hold on to its number two position, though Pakistan and Mexico are performing strongly.
Losing out on the high-margin apparel business is a big negative from India's point-of-view. During calendar year 2010, of India's total textile and clothing exports of $5.38 billion to the US, apparel accounted for a major chunk at $3.11 billion, while non-apparels stood at $2.26 billion. India has figured among the top three apparel suppliers to the US during most of the last half-a-decade.
According to industry players, market deficiencies are showing up in India's case. “Ad-hoc raw material policies, outdated labour laws and lack of scale in the weaving and processing segments are reflecting in India's performance,” the owner of a Delhi-based export house said.
For instance, economies of scale in weaving and processing operations in countries such as China have been critical to their growth in garmenting. Chinese investors, who are now investing in Vietnam, Cambodia and Indonesia, are trying out the integrated approach in these countries as well.
In India, the limited availability of large lots of fabrics, mainly because of the shifting of fabric production from the organised sector to the decentralised sectors, has prevented scaling up of garmenting operations. While in 1951, over 70 per cent of India's fabric production was in the organised sector, by 2010, this had declined to 3.3 per cent. Currently, close to 80 per cent of the fabric used by the Indian garment industry comes from the power loom sector.
“Lack of consolidation in the weaving and processing segments has resulted in inconsistencies in fabric quality. Decentralised units are not able to deliver large lots of quality fabrics with shade consistency, forcing garment makers to import fabrics,” Mr D. K. Nair, Secretary-General of the Confederation of Indian Textile Industry, said.
To make matters worse, India has a small presence in the mass production of basic and regular wear garments, where China has a strong presence and Vietnam and Bangladesh are gaining ground.