India should aim at more value-added textile exports to EU

India needs to expand its textiles export basket with value-added items like jerseys, pullovers, trousers and shorts to gain a larger marketshare in the European Union (EU), according to a study by the textiles committee of the Union textiles ministry which looked at the opportunities offered by the post-quota regime.

The products in demand are T-shirts, pullovers, trousers, women's blouses, men's shirts and overcoats, dresses, skirts and suits for women.

Trousers, pullovers and T-shirts are the hottest items of the EU markets and women's blouses, men's shirts and women's overcoats are the next most demanded category. The top 10 items make up 48.12 per cent and trousers, pull-overs and T-shirts take the top places in clothing imports.

These products together contribute to about a third of the clothing imports. India is among the top 10 suppliers in seven categories and India holds the second place in women's dresses, women's suits and men's shirt, third in women's blouses and night dresses, fourth in T-shirts and sixth in women's skirts. India does not count in the top 10 in pullovers, trousers and women's overcoats.

These categories are account for high value-added items and in high demand and account for 55 per cent of the top 10 products in value terms.

While India has been able to consolidate its position in the seven categories it had an edge, women's dresses have not been its forte.

The Indian export basket shows insignificant shares of ladies jacket and overcoats, but has good shares in jersey and pullovers (10.81 per cent) and trousers (6.86 per cent).

While India has insignificant positions in the above items in the import basket of EU, they has a good share in the export basket of India. This, coupled with 100 per cent quota utilisation over the years indicate that the country has the potential to export these value-added products to a much larger market. The average unit value realisation (UVR) is estimated at 11.28 euros, the highest being the women's overcoats and jackets "" 17.90 euros.

But the data on quota utilisation for ladies' jackets and overcoats indicate that since quota did not restrain exports, the marketshare in post-quota regime is unlikely to increase and it is even possible that it could shrink. Hovever, jerseys, pullovers, trousers and shorts were severely constrained by quotas, having overutilised quota during the last eight years from 1996.

Studies reveal that if some categories are constrained by quota and the exporting country is able to achieve the quota levels, their performance will improve in the quota-free markets. Given India's design capabilites and availability of raw materials for the above categories, the export share of these categories is expected to fare well in the post-quota regime.

Jerseys and pullovers as well as trousers and shorts have been the most important MFA imports to EU and their import shares during 2002 are 10.1 per cent and 13.2 per cent respectively.

The average UVR of jerseys and pullovers is estimated to be 7.32 euros and trousers and shorts, around 8.33 euros. From 1995 to 2002 the total clothing imports from external suppliers to EU grew around 2.5 per cent annually and during the same period intra-EU trade declined by 36 per cent.

India in 1995 constituted 6.5 per cent of EU's import market but it fell to 4.99 per cent by 2003. For the same period China increased its share from 13.77 per cent to 20.47 per cent. Yet, India is among the top 10 suppliers to EU and is ranked eighth in the total MFA clothing exports.

In the EU market India is one of the leading supplier but Turkey continues to be the biggest competitor to India and China. With regard to unit prices India appears to be lower than both Turkey and China.