Creation of Domestic and International Market Mix
Looking at the global economic situation from Australia to America, it is clear that it will take two more years for the economy to revive and
grow. More importantly, as the textile industry is dependent on the buying
power of consumers, it is difficult to envision an immediate recovery.
Governments around the world are doing their best to boost consumer confidence
and provide tools for consumers to spend. Australian government has announced a
stimulus package of over 40 billion Australian dollars which includes cash
bonus with an aim of spearheading sales. The United States government as part
of its recovery plan will provide tax deduction of $8 to $13 per week with a
view of encouraging consumers to buy. The fact that money is returned to the tax
payers in the form of a monthly tax deduction is to prevent savings by consumers
and improve spending. These spending enhancement measures will take some time
to provide real impact. Even though these industrialized nations which are
important for Indias export dependent textile sector are doing all they can in
terms of fiscal stimulus and monitory policies, a recent report by the National
Association for Business Economics based in Washington DC, USA has predicted
that the unemployment rate in the United States will rise to 9 percent by the
end of 2009 from its current 7.6 percent. More importantly, an alarming signal
for commodity industries such as the textile is the prediction by the National
Association for Business Economics that the consumer price index will decline
0.8 percent in 2009. Many negative factors such as the decline in consumer price
index, lack of consumer confidence, increase in unemployment rate and home foreclosures
in developed economies will have negative effect on Indias export sector.
Therefore, time is ripe for all stakeholders of the Indian textile industry to
sit together and come-up with a market model which can serve as a cushion in
recession and bleak export scenarios. Such a model should be based on a mix of
domestic and international opportunities for the Indian textile industry. Although
this may not be recession proof solution, it will be a safety net than what is
excising currently in India. How can this be achieved? The solution to this is
to diversify by enhancing the scale of operation with a different twist. As
explained above, enhancement of scale is not merely a vertical expansion but a horizontal
one. In other words, expanding the product basket and product mix for a
particular industry based on its core competency and resources. The second
point is to have incremental quality enhancement which will have bottom to top
quality improvement; thirdly, creative measures with the help of incremental
innovation to develop new products with existing resources should be given an
equal priority.
Three Immediate Priorities for the Indian Textile Industry
Why is Indian textile industry lagging behind China? Why is the Indian garment/fashion industry lagging behind Italy? We all have clear
answers to these questions. They are: scale and quality. Indian textile
industry and for that matter the Indian manufacturing industry has to chase the
Chinese and Italian industry to achieve output and quality. Whereas, by
properly utilizing the available resources and engaging in collaborations with
the Indian R&D sectors, incremental innovations can be quickly achieved in
the Indian textile industry. These small innovations may help the Indian textile
sector to catch-up with the Chinese and Italian industry. Here it is useful to
refer to a column in the widely read USA based Atlantic Monthly. James Fallows of
the Atlantic Monthly in one of his famous reports from China, "China Makes
the World Takes, July 2007," admires the manufacturing power of China and
attributes it to its abundant manpower resource. Basically, the economy of
scale in the manufacture of commodity products has given China this competitive edge. So the situation which was rosier years back in China is changing, when its competitive advantage i.e., low cost abundant labor is getting somewhat
eroded due growing labor power in other low wage countries. Today, 20 million
migrant workers are jobless in China who are returning back to their villages
due to slump in export and loss of jobs. At the same time, high labor wage countries
which are known to produce designer products such as Italy are struggling to
keep their factories open. What is the best solution in this situation? Those
countries that offer a balance of good quality products at competitive prices
will have better opportunity. Also if emerging markets like India which could
not only develop its industry base to cater to export markets but also to serve
its growing middle class domestic market will be the winners in near long term.
To reach this milestone, the Indian textile industry should
stand on three legs which are:
1. enhancement of its scale, which is horizontal and
logical diversification;
2. improvement in the quality of its products
3. innovation. The future for the Indian textiles sector
rests in these legs.
The article was originally published in Textile
Review, March 2009
About the Author
The author is
associated with Nonwovens & Advanced Materials Laboratory, Texas Tech University, Lubbock, Texas, USA.
