Reinforcing its commitment of creating increased employment opportunities in the country and actualising the ‘Make in India’ initiative on ground, the government has announced a special package for the apparel & made-ups industry, aimed at employment generation and promotion of exports.
Global trends in the apparel, made-ups and textile industry are opportune for the Indian sector. Industry is shifting base away from China, creating a potential market of more than USD 280 billion for other countries to capture. The shift is already underway in the apparel segment, and similar movements can be expected in fabrics and yarn production as well. Bangladesh and Vietnam are the current favoured investment destination, and production hubs are also emerging in African countries like Ethiopia. With a strong resurgence seen for manufacturing in the US, the future landscape for the sector could be dramatically different.
The recent CII BCG Study on Textiles, Made-ups and Apparel 2016 reveals that the global industry would be shaped by four major factors, going forward: a) cost competitiveness, especially in labour and wage structures and energy structures per unit of output; b) ease of market access, both in terms of-tariffs/ duties and time to market; c) ease of doing business; and d) technical innovations.
India is uniquely positioned to capitalise on this opportunity. We have the complete ecosystem from fibre to fashion, both in cotton and synthetics, an abundant workforce, a dynamic and growing domestic market and a top position in exports as the second largest exporter of textiles, apparel and made-ups in the world.
Addressing the major growth drivers, the government’s policy package for the sector is timely. It is labour friendly, promotes economies of scale and boosts exports, and will be a game changer. Empirically, there are multiple factors that have left the once major industry in a fractured state. Dismantling of the Multi-fibre Arrangement (MFA) in 2005 did away with quotas, making the export market a free-for-all. Also, the Trans Pacific Partnership (TPP) is likely to give countries like Vietnam an advantage which can adversely affect Indian Industry.
Significant labour reforms in the Rs 6,000 crore package such as EPF scheme revisions, increase in overtime caps, and introduction of fixed term employment are envisaged to generate more than one crore jobs. A majority of these new jobs is likely to go to women since the garment industry workforce includes 70% women. This is a major step towards social transformation of the country, a much larger goal to achieve.
It is also important to note here that this industry is heavily dependent on seasonal demand – a condition that is ideally suited to agricultural workers. There is need to craft labour laws – even at a localised level – that would address the seasonal employment and provide the much required scalability to match up with global productivity. The industry can provide quick employability to a large mass of workers, which is especially important given that ~ 18 Crore Indians are entering the labour force in this decade. It can spread development to rural areas and decongest urban areas.
If the industry achieves breakout growth, we estimate another 50 million jobs to be created by 2025,around 35-40 million of which will be for women. Recognising the fact that the apparel, made-ups and textile industry is already the second largest employer after agriculture, the government’s move is certainly in the most desired direction.
Much of the Indian industry’s present conditions are the result of many factors over the years – traditionally, the industry was reserved for the small scale till 2000. Also, the focus of government financing has generally been on spinning and yarn, and was not translated to the highest end of the value chains. There has always been a focus on cotton, driving more resources to cotton based fabrics, at the expense of synthetics. India has the resources to promote both – and synthetics have a much higher margin, globally. Given the background, it is critical today to develop a strong, robust and balanced value chain to compete globally.
With increased time bound demand, global investors are looking for speciality clusters. It is necessary to develop clusters of excellence, or promote Hub – Spoke models or simply, communities that can span the value chain and benefit from each other. There is an inherent advantage that India has, which our current competitors do not. Only China had that advantage, and if we want to exploit the opportunity, we will have to strengthen our complete value chain. We have excellence at every step – spinning, yarn, to textiles, and finally garments.
Emergence of new value-added segments in the industry is also creating opportunities and challenges for the manufacturers of tomorrow. Indian entrepreneurs need to invest both financial and human resources on technology and innovation to address the constantly evolving markets.
Moving an entire industry and creating millions of jobs is not easy. But it can be done, with bold ambition, will and perseverance. We believe the recent reforms will fundamentally change the trajectory of the apparel, made-ups and textile industry and help it to regain its global stature.
Source: CII Mission Manufacturing 2017