Let us examine two specific products – textiles and IT products which can form part of the thrust products for export by India on account of the national competitive advantages they enjoy.
Textiles constitutes strong category for exports. The category includes cotton fabrics, cotton yarn, man-made textiles, silk, wool and ready-made garments. Textiles, including ready-made garments, are the countryâ€™s single largest export category, accounting for about 33 percent of the total exports. Of these, the cotton sector is the leader. The growth in textile exports over the past 10 years has ranged between 30 and 40 percent per annum and major part of the cotton exports is going to Bangladesh, the US, the UK and Germany. Woolen textiles and silk enjoy demand in a large number of countries.
There are a number of welcome developments on the textiles front. First, in recent years, some value addition is taking place in textiles. Secondly many well-known textile firms have taken to export in a big way. Reliance Vimal, Arvind Mills, Mafatlals and Bhilwara are among the big players. A spate of 100 percent export-oriented units (EOUs) to manufacture items like denim and terry towels have also come into existence, adding a new dimension to Indiaâ€™s textile export.
Ready made garments: Ready made garments form a major sub-category within textiles. In fact, ready-made garments already account for nearly one-eighth of Indiaâ€™s total exports. And nearly 20 percent of the domestic production of ready-made garments is for exports. The EU is the largest market for Indian garments, accounting for over 40 percent of Indiaâ€™s total garment exports. The region has been recording steady growth over the years.
The great potential in respect of garment export can be appreciated when one looks at recent performance of exporters in the small town of Tirupur in Tamil Nadu. Tirupur is exporting goods worth Rs 8,000 crore per annum. The exports consist of Knitwear like T-shirts, jogging suits, pyjamas, children wear, shorts and sports wear. The main markets are European countries; hosiery items are exported to the US, too. It is striking that 85 percent of the knitwear exports by India now comes from Tirupur.
A category with good competitive advantage: Garments is a category where the country has a strong competitive advantage. In India, labor cost constitutes only 5 percent of the total cost of products of readymade garments, compared to around 50 percent in Europe. Moreover the new economic policy has de-reserved the garments sector, allowing large firms to set up manufacturing units, provided they export 50 percent of their production. Many large business houses are now entering this industry; a number of them are securing collaborations with well-known foreign firms and are setting up large-scale manufacturing units; others trying to secure the franchise of well-known foreign labels and marketing collaborations.
Indian Business Houses active in garments exports:
Arvind Mills, a major global player in denim, have turned to the export of garments. They have established an international network for marketing garments. Though Arvind Mills suffered setbacks in the closing years of the 1990s, the company has built up sufficient infrastructure and expertise to stage a come back into the global textile scene.
DCM, the Bhilwaras and the Piramal group are also pursuing garments export with long term involvement. Bhilwaras have set up Bhilwara overseas Ltd Headquartered in Douglas, UK, to market their product in Europe. They are also planning to source ready-made garments from various to ease the pressure on its Indian operations.
Zodiac is trying to market Indian Brands such as Globe Trotter and Mark Gibaldi abroad. It has set up exclusive shops in Dubai and Doha, and also tied up with wholesalers in Europe.
Mafatlals have plans to export garments under their own brand names. Already Mafatlals supply cloth to some of the worldâ€™s most famous garment sellers like Mark and Spencer.
Many non-textile firms have also turned to export of readymade garments. Eicher, Triveni Engineering, ITC, the Tata group and Vam Organics are examples of this category. All these companies have tied up with well-known international brands to market their ready made garments globally.
Eicher join with Samsung of South Korea; Triveni with Esprit of France and ITC has tied up with three different brands, one each from Germany, the US and Italy. The Tata group has plans to invest 50 percent equity in a joint venture with Italian face maker, Italiano. Italiano will provide the latest lace designs to the JV.
A three fold strategy: In garments, the strategy required for the future is three fold: development of large-scale production base, improvement of quality and a marketing strategy that will help exploit untapped markets, as well as non-traditional garment items. Garment exporters must develop products or catering to up-market segments across countries and also go in for diversification into items swimwear, beachwear, institutional / industrial clothing, defense and para-military clothing etc. Quality assurance is of crucial importance.