Textile trauma

The most telling statement about how India's textile exports have done after they were freed up is that the US and the EU have been threatening to take action against Chinese textile exports! These have surged while India's have merely grown.

There is controversy about this as well, since the official data from the Directorate General of Commercial Intelligence and Statistics (DGCIS) suggest that, leave aside growth, India's textile exports have actually fallen.

As against exports of $1.6 billion in the first quarter (January-March) of 2004, according to the DGCIS, this year's first quarter exports of readymade garments were a mere $1.2 billion; for cotton textiles the fall was from $1.23 billion in January-March 2004 to $0.9 billion in 2005.

The data, however, don't square with that from the US government on its import of textiles""which shows that textile imports from India rose by 27 per cent in the same period.

The US accounts for around a fourth of India's textile exports. Exports to the EU, which account for 35-40 per cent, have also shown growth of just under 10 per cent (according to the Indian Cotton Mills Federation), and not a decline as the DGCIS figures suggest.

While the DGCIS needs to work on improving the reliability of its data, including reconciliation with data from other countries, even the most optimistic figures show that India's performance is good only if compared against itself""put it against China and the performance pales.

China's exports to the US alone have risen 60 per cent in the first three months after trade was freed up in January; in the case of apparel, the rise is around 100 per cent.

Given the huge difference between Chinese and Indian productivity in the sector, it is unlikely that India will be able to take much advantage of the 6-7 per cent export taxes the Chinese imposed last week on its textile exports to stave off the imposition of trade curbs by the US and the EU.

India's problem, it is well known, remains poor investment by large firms that can meet the delivery and quality requirements of big buyers abroad, such as Wal-Mart.

All told, including the funding from the Technology Upgrade Fund Scheme, investment in 2004-05 was a mere Rs 15,000 crore according to the office of the textile commissioner.

Though some 50 per cent higher than in the year before, this pales into insignificance when the industry estimates that it needs Rs 140,000 crore of investment by the end of the decade to modernise if it is to reach the decade-end export target of $50 billion (compared to the current $13-14 billion).

Since the sector also offers huge employment potential, the government needs to step up its assistance to help units expand and modernise""the TUFS, for instance, is available only to the organised sector, and ways need to be found to increase its spread.

But none of this will make a difference until labour laws allow flexible hiring since it is only then that people will set up really large capacity in an industry which is seasonal in nature and where orders can be fickle.

While doing so in the entire country would seem like asking for the moon, to lose the opportunity to do so in the Special Economic Zones is inexcusable.