Apparel industry's position in Indian economy

The significance of this sector and historically, its contribution to India need not be stressed. This industry is the largest net foreign exchange earner, contributing to over 20 per cent of India's exports and 14 per cent of industrial output, accounting for more than 5 per cent of GDP and largest employment generator after agriculture. Currently, the Indian textile and clothing sector has a share of 3.9% in the global textile export trade.

Competitors such as China have a share of 20.2% (excluding Chinese Taipei with 4.8%), Republic of Korea having 5.1%, Pakistan 3.5%, Turkey 3.5%, Indonesia 1.7% and Thailand 1.4%. This is where my focus is how to get a larger share of the global market. The nominal 3% growth in apparel exports in 2006-07 and a sure decline in 2008-09 brings the question of "Way Forward".

Global positioning of Indian apparel

As per WTO's reports, India presently has 3.3% share in world apparel trade, a mere 0.2% increase in the last five years. If we compare this to the commonly used benchmark, i.e. of China's growth, we see that China's share has increased by 12.4% during this same period. With apparel exports worth US$ 95 bn in 2006 and a world share of 30.6% in the apparel market, it has raced much ahead of India. India's performance in 2005 had promised to reduce the gap between the two countries performance with India's exports growing at a much faster rate that that of China, but 2006 and 2007 has shown that the long term growth trajectory would be much lower than the growth rates achieved in 2005.

Estimates from UN Database shows that India's share in apparel exports in the world is around 3.13%. However, the basic point remains that India is fast loosing market share to some of the much smaller economies. During 2006-07, apparel exports grew by only 3.1%, one of the lowest among the other major Asian suppliers. China and Vietnam had the fastest growth, though some of the challenges being faced by the Chinese industry, like rising Yuan and labour costs are similar in nature to the Indian industry.

Performance of leading suppliers of apparel in 2006

Notes: India's figures are from DGCI&S and are for financial year. Data for other countries are sourced from UN Database for the calendar years.

In fact, comparing with China has started sounding optimistic and the focus has now shifted to much smaller economies like Bangladesh, Vietnam, Indonesia and Cambodia, many of whom are threatening to or have already surpassed India, in terms of growth rates. Most of these countries have taken advantage of the safeguard quotas on China to increase their market share in the US and the EU, while India has missed this "limited period" opportunity given the currency disadvantage it has been facing since early 2007.

The current market positions can also be gauged by the performance of all these countries in the US market where the competition has really heated up. In the US market, it was clearly the year of the smaller economies, especially Vietnam. While China grew by 23%, Vietnam grew by 35%, overtaking Indonesia and India. India slipped from being the third largest supplier in 2005, to the 5^th position and may be soon overtaken by Bangladesh with the value difference between exports of the two countries narrowing down drastically this year.