2Globalization In The Apparel Industry: A Study of Preparedness of Indian Industry Dr. Pradeep JoshiAsso. Prof.,NIFT, New DelhiDr. S.M IshtiaqueProf., IIT, New DelhiDr. Sudhir JainAsso. Prof., IIT, New Delhi7th IFFTI Annual Conference 2005 at Bunka University ,Tokyo, Japan
3Trade Restriction on Textile and Clothing The Cotton Arrangements ( )The Multifibre Arrangement (1974 – 1994)Agreement on Textiles and Clothing (1995 – 2004)WTO Era- 1st Jan 2005 onwards
4The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974.The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas.The Agreement on Textiles and Clothing (ATC) mandated progressive phase out of import quotas established under MFA &The integration of textiles & clothing into the multilateral trading system before January 2005.
5Total world trade in Textiles & Clothing ( value in US$ Millions) Year1990199520002003Textiles104354152319154366169422Clothing108129158353197498225940Source: WTO
6Leading exporters of clothing 2003% ShareChina52.0623.0EU19.048.4Turkey9.934.4H.Kong8.203.6Mexico7.343.2India6.452.9USA5.532.5Bangladesh4.321.9Indonesia4.101.8Romania4.06Source: Compiled from WTO data
7Leading importers of clothing 2003% shareUSA71.2731.5EU60.3926.7Japan19.488.6H. Kong15.947.0Canada4.502.0Switzerland3.921.7Russia3.711.6Mexico3.031.3S. Korea2.491.1Australia2.101.0Source: Compiled from WTO data
9Apparel imports to US market ( January- June, 2005)Imports20042005change% changeWORLD35,46638,8273,3619.48%TOP TEN COUNTRIES:CHINA97.15MEXICO3,8793,633-246-6.34%HONDURAS1,5161,530140.89%BANGLEDESH1,0561,28422821.54%SALVADOR967956-11-1.18%VIETNAM1,4541,440-14-0.95%DOM REP1,1331,086-46-4.10%INDONASIA1,3861,59520915.06%INDIA420.0837.59(Source - Compiled from US DEPARTMENT OF COMMERCE, OFFICE OF TEXTILES AND APPAREL)
10US MARKET (Jan-June 2005 over corresponding period in year 2004.) Import of apparel in US market has increased by 9.48%.There is tremendous growth in imports fromChina(94.33%)India(34.44%),Bangaladesh(21.54%)Negative growth in imports from Mexico,Dominian Repubic etc.
11Apparel imports into US: Competitive scenario Qty in million Metre square value in US$ millionFromJan-Jun 04Jan-Jun 05% changeQtyvalueIndia312.7413.7532.3137.59China1229125.197.15Bangladesh425.0858.82512.9020.6622.73Pakistan237.4497.00265.18551.6611.6911.00Sri Lanka190.678.44225.45795.9918.3917.33(Source: Compiled from trade data)
12Competitive position in US market China is highest gainer of phasing out of quotas in US market with % growth in volume and 97.15%(value).The imports from India have increased by 32.31%(quantity) and37.59%(value).The other gainers of WTO era are Bangladesh (22.73% value growth) followed by Sri Lanka (17.33% value growth) and Pakistan (11% value growth).
13Apparel Imports to EU market (Value in million Euro)Apparel typeJan-Jun 04Jan-Jun 05% changeKnitted-3.4Woven-2.4total-2.9(Source: Compiled from trade data)
14EU Market (Jan-June 2005 over corresponding period in year 2004.) The trends in EU market reflect a decrease of (2.9%) in imports.The negative import is seen in knitted (-3.4%) as well as woven (-2.4%) apparel.
15Apparel import into EU from India (Value in million Euro, quantity in million kg)Apparel typeJan-Jun 04Jan-Jun 05% changeQtyValueKnitted54.99627.265.83688.919.719.84Woven40.26736.142.87872.56.4818.53total95.251363.108.71561.14.1214.53(Source: Compiled from trade data)
16Position of India in EU market The imports from India has increased by 14.12%(qty) and 14.53(value).The growth in imports is 19.71%(qty) for knitted and 9.84%(value) while there is growth of 18.53%(value) for woven apparel imports in EU during this period.Import of knitted apparel has increased in quantity while woven apparel have better growth in EU imports in value.
17Apparel import into EU from other Asian Countries (Euro mn, qty mn kg)Apparel typeJan-June 04Jan-June 05% changeBangladeshKnitted37.1759.3059.6Woven70.3476.709.1107.51136.0026.5China212.92312.7746.9300.52467.8155.7513.44780.5852.03Pakistan11.9411.30-5.37.857.46-5.019.7918.76-5.2Sri Lanka5.835.59-4.112.1913.349.4total18.0218.935.0(Source: Compiled from trade data)
18Competitive position in EU market The imports from China have increased by 52.03%(value) followed by Bangladesh (26.5%(value) and India.The imports from Sri Lanka have increased marginally(5%) while imports from Pakistan have decreased by 5.2%
19Summary…… India & China are biggest gainers in WTO era Import patterns are set to change in favour of Asian countries.
21Indian Textile & Clothing in World Trade India has 3.8% share in world textile & 2.9% in clothing trade.Source: Compiled from WTO
22India’s Clothing Exports The exports of clothing is increasing with increase in share in EU and US markets . EU & US are the largest market of clothing exports from IndiaSource: compiled from AEPC Handbook of Statistics.
23UVR of Clothing Exports Average UVR of clothing exports from India is around $ 3.5.Source: compiled from AEPC Handbook of Statistics.
24Productivity Levels of Clothing Firms The productivity for most of the clothing items is relatively low in India. Hong Kong, Taiwan, China are having much higher productivity than IndiaSource: CII Accenture “Textile Industry: Road to Growth” Report- 2002
25Summary Increasing percentage share of clothing in world trade Indian textile & clothing trade is concentrated more on textilesEU, China are leading exporters of clothing.EU, US and Japan are leading importers of clothing.
26India’s trade is for low value items in clothing Productivity levels as well as investments in clothing firm are relatively low in India.With integration of textile and clothing trade into WTO, the trade is going to be liberalized.Increasing competition, decreasing prices, shifting trade pattern are expected in post MFA scenario.
27Research Design Sample Size Primary data collection was done through response of garment exporters, fabric manufacturers and buying houses using three separate structured questionnaires.Sample SizeGarment Exporters145Fabric Manufacturers69Buying Houses38
28COMPETITIVENESS OF INDIAN APPAREL INDUSTRY: SURVEY FINDINGS AND ANALYSIS
29Average Price (FOB) for Different product Categories being Exported or Sourced from India(Response of Garment Exporters)
30Average Price (FOB) for Different Product Categories being exported or Sourced from India (Response of Buying Houses)
31Productivity Level for Clothing Firms ( Response of Garment Exporters )
32REASONS FOR LESSER FOCUS OF INDIAN EXPORTERS ON EXPORT OF HIGH VALUE ADDED PRODUCTS FROM INDIA
33Perception Difference between Buying Houses & Garment Exporters
35Sector-Wise Production of Cloth The production of fabric from powerloom has increased while that from mill sector has reduced in last two decades.Source: compiled from Compendium of Textile Statistics
36Fibre MixThe international demand of textile is more of MMF while the production as well as exports from India are of Cotton indicating a mis-match.Source : KSA Analysis , 2000
37PERCEPTION ON AVAILABILITY OF FABRIC FROM VARIOUS SOURCES
41SummaryIndian Clothing industry primarily caters to lower end of the market.The clothing manufacturing in India has lower productivityIndian clothing manufacturing industry is less competitive due to lower productivity, less research and development effort, technology, non-availability of finishing facility and is not being able to move up in the value chain.
42The unfavorable cost competitiveness is also caused due to non-availability of raw material (fabric) particularly MMF which is being increasingly imported from China, Taiwan and Korea.The increasing import of fabric is not only affecting the cost competitiveness of Indian clothing industry but it is also affecting textile (fabric) industry
43INITIATIVES TO BE TAKEN TO FACE COMPETITION IN INTERNATIONAL MARKET
44Comparison of Responses from Garment Exporters & Buying Houses
45To Conclude…….To face competition in WTO era the focus on product development & design is needed which requires investment into latest technology & focus on better sources of raw material.Clothing manufacturers are required to make efforts for changing the perception of being producer of basic items.Product specialization is required to be built up. The need is to have specialization in knits along with woven
46New markets (besides US & EU) are to be explored …ContdNew markets (besides US & EU) are to be exploredIndian fabric is preferred for 100% cotton, while for synthetics China, Taiwan & Korea are becoming sourcing base due to cheaper price and superior quality. The requirement of clothing industry is for consistency in quality and quantity, wider width and lower cost.
47…ContdIndia’s fabric sector needs to become competitive by investment in latest technology.The government also needs to intervene by having a competitive policy framework in tune with other competitive countries in the world.
48Thank You! Dr.Pradeep Joshi Department Of Fashion Management Studies National Institute of Fashion TechnologyNew Delhi