Labour intensive sectors in India are going through a rough patch. While overall merchandise exports shrank only a bit during last fiscal year, all the traditional labour-intensive sectors witnessed sharper decline. Apparel industry obviously was no exception.
What is more worrisome is the fact that apparel export curve has almost flattened over last six years. Therefore, a serious re-think of strategy is the need of the hour.
The single biggest problem in the apparel sector has been lack of scale. Average number of machines in an Indian apparel manufacturing unit is 300-400 as against 800-1000 machines in competing countries.
While Production- Linked Incentive (PLI) in the textiles sector for MMF fabrics and MMF garments has been a great initiative to augment production capacities, it has not generated the excitement it should have, notwithstanding the flawless selection of products. The lukewarm response can largely be attributed to the higher investment threshold limits.
There is need to launch another version of PLI with lower investment criterion to enable participation of MSMEs.
Speed-to-the-Market
Indian exporters mostly miss the bus due to unfavourable speed to the market despite the diverse range, variety, and high fashion quotient in their offerings.
The immediate answer to this problem could be in building warehouses in prominent locations, particularly in the free ports and trading hubs, for speedier access to consumers.
Many apparel players shy away from re-investing the profit into the industry on account of hassles of managing large workforce, drying up capital infusion in the sector. The government should grant direct tax concession on the ploughed back profit to encourage re-investment in the same sector.
The migrant nature of workforce in most of the apparel clusters results in erratic supply of labourers and acute shortage during peak period. This adversely impacts capacity utilisation and consequently cost of production.
The industry should thus be encouraged to move to labour surplus States for uninterrupted labour supply through incentive like “Relocation Compensation Package.”
Existing old and outdated machinery need to be replaced. Machineries not manufactured in India like certain shuttle-less looms, knitting machines, non-woven machines etc. should be identified and their import duty rates reduced to zero for three years to facilitate cost-effective technological upgradation.
After this timeframe, a high tariff wall may be raised to encourage foreign investment in machinery manufacturing.
Abysmally low wages, LDC (Least Developed Country) status and duty-free access to EU give countries like Bangladesh a distinct unfair advantage over India. Therefore, the only way to stay competitive is to improve productivity through increased technological intervention.
Technology has a use in fast fashion forecasting, predicting consumer preferences, manufacturing smart textiles, designing smart factories, in intelligent designing and manufacturing, etc.
Increasing use of blockchain technology in traceability, robotics in quality control, IoT in RFID tags in wireless sensor networks and in end-to-end digital integration, just to name a few, will transform the entire industry.
Aggressive marketing to improve visibility of Indian textile and apparel products by having an India theme pavilion in all major international fairs and exhibitions can go a long way in building Brand India.
To harness the full potential of e-commerce, the value cap on e-commerce exports be raised from existing ₹10 lakh and e-commerce exporters be provided level playing field by allowing them to claim GST refunds and export incentives.
These measures will not only arrest the decline but also give much-needed booster dose to the apparel exports.
The writer is Secretary General, Apparel Export Promotion Council