With China showing more interest in engineering and IT and Bangladesh being looked at as non-compliant country, global players are eyeing India’s potential for outsourcing with great interest. India, with its fairly high-level of compliant garment export factories, has emerged as an attractive sourcing destination. Apparel exports in the first 5 months of this fiscal have witnessed a 14% increase in Dollar terms, as per reports from A. Shaktivel, Chairman of AEPC (Apparel Export Promotion Council). A growing number of chief purchasing officers in European and US apparel companies are scrutinizing the sourcing strategies of Bangladesh and its power as a sourcing destination for foreign retailers such as Wal-Mart has reduced to a substantial extent. While China has started to lose its attractiveness in this realm, India is turning out to be an attractive alternative. India has the second largest textile infrastructure after China, and is one of the few countries in the world which has production at each level of textile manufacturing.
The present domestic apparel market size of India has registered a strong growth of 12% from 2007 to 2012 despite global uncertainties. It is the only major apparel market where woman’s wear is not the largest category in value terms.
Indian apparel sector offers various competitive advantages as compared to other countries. It possesses both raw material and manpower, which acts as an inherent advantage. Add to this the fact that the market is mature today.
Raw Material Availability
The fundamental strength of the Indian textile industry is its production base of wide range of fibre including natural ones like cotton, jute, silk and wool to synthetic/manmade fibres like polyester, nylon and acrylic. The textile and apparel industry In India includes almost all types of fibres- natural fibres, synthetic fibres and multiple blends of these fibres.
Inexpensive Trained Manpower
In today’s dynamic business environment, the demand for trained manpower with requisite competencies for manufacturing quality products efficiently with sophisticated machines is high across the apparel sector. Realizing this, Indian government has launched various schemes for the textile and apparel sectors with the objective of building capacities of institutions, providing skill development and training.
Presence of Complete Textile Value Chain
India is one of the few manufacturing countries in the world where all levels of textile value chain (from fibre to garment manufacturing) are present. India textile and apparel sector is divided into organized and unorganized sector. Unorganized sector consists of small scale and medium scale mills while organized sector has large sector units with high production capacity. This structure provides apparel sector a great flexibility to cater small and customized orders on one hand and also it has capability to execute large quantity orders as well.
Strong IP Laws
India has strong IP laws in place to protect the interest of manufacturers. Many International companies have already established their research and development centers in India due to strong IP base in India. The international companies investing in India have full flexibility to venture into their own or join with any Indian partner of their choice.
A strong obstacle to sourcing from India is that local sourcing requirements could deter foreign retailers from taking advantage of new rules allowing them to take full ownership of their operations in India. Many retailers are keen to invest in India but are concerned about the local-sourcing clause. To overcome this obstacle , the Government of India needs to provide more clarity on fine print to potential investors, regarding local-sourcing clause.
With internet penetration increasing in India, the rules of the sourcing game are changing internally as well. Today more and more Indian SMEs are registering themselves, building websites, integrating payment gateways and setting up ecommerce services on their sites. This not only acts as an advertising tool but also brings them the much needed visibility in the online space. Typically, a lot of US and European businesses check for products online.
Similarly, with improving infrastructure and companies exploring the business potential of the small towns, apparel manufacturers in India are far better linked today than ever before. As mentioned above, since the entire value chain of the manufacturing sector is present in India, today there is higher potential for ancillaries, subsidiaries, vendors and service providers.
It is essential for authorities to understand that India have all the prerequisites to become the world’s largest sourcing destination for the apparel industry, however, unless there is complete political stability and a balancing of the regulatory atmosphere with aggressive marketing, a lot of countries will remain oblivious to the country. Similarly, by encouraging apparel manufacturers to attend international trade shows and strengthening the B2B events culture, India can showcase itself better.
The apparel manufacturing industry has seen its quota of ups and downs in recent years, the stability that is beginning to show is that of a ship that has learnt to weather large storms. We are now seeing regulations regarding foreign direct investments easing and a consistent level of interest from European countries. The strategy for the Indian sector on the whole should focus on the entire globe and not just pockets of interest.
China will bounce back and India will need to compete with it. However, in the future, India is most likely to have an upper hand as there will be more government focus to support its international ventures and tie-ups. China and other Asian countries in the meanwhile are realizing the massive potential of their service sector and looking to capitalize on the recovering markets across Europe and America. Theoretically, the Indian apparel sector is at the foothills of a large mountain whose peak it has the potential to reach alone.
Published in the Apparel Magazine (CMAI)