Extended quota restriction on China to benefit India

All is not lost for the Indian textile industry. It is feared that China will overtake India after the quota restrictions are abolished.

But if the United States (US) and the European Union (EU) levy quota restriction on China under a special provision may benefit Indian textile exporters.

The US and EU may impose quota restriction if the Chinese exports are seen hurting local manufacturers.

"With the dismantle of quota, post WTO, Indian textile exporters will have an edge over the others because of its variety of designs, timely delivery and customer satisfaction. Indian exporters will definitely have an edge over China in the premium and the upper end segments," B Ravi, vice-president, corporate finance and company secretary, Group Ashima told Business Standard.

With the doubling of Chinese textile exports to the US in the past two years, the US recently re-imposed a 7.5 per cent growth limit for import on three products which were removed from quota restrictions, which includes Chinese made brassieres, dressing gowns and knit fabrics.

Quota restraints on China could continue beyond December 2004 for other products too, especially given that there is increasing pressure by about 1 million textile workers during the presidential elections in the US.

Even in the past, the US has warned that it could raise import duty on textiles from China, if it did not value the Yuan. If these measures are imposed, Indian textile exporters would overtake Chinese exporters, after the quotas are dismantled.

India's relative lack of economies of scale and infrastructural bottlenecks are key constraints to match Chinese growth. However, prospects of selective quota restrictions on China beyond 2004, may give Indian an initial headstart.

While other regions, such as NAFTA countries like Mexico, AGOA countries like Mauritius, and Bangladesh are unlikely to gain share and countries like Taiwan, Korea and Hong Kong are likely to be in disadvantaged position due to lack of competitive edge.

The Indian Textile Ministry has targeted the textile exports to grow by 21 per cent CAGR to $50 billion by 2010.