9 March 2020
Apparel export industry is passing through a tough time and industry representatives have been knocking the Government’s door time and again in this regard. So, it becomes highly important to know the suggestion of bureaucrats, policymakers and experts who are instrumental in the decision-making process. We bring to you the views of such top officials spotted in a seminar of the apparel industry last year.
We are mostly into cotton-based apparels and are also fighting with the competitor countries which are among the least developed, poorest countries in the world and have the cheapest labour. So, it is increasingly important to adopt best manufacturing practices. We must keep in mind that ‘Good HR Practices’ lead to higher productivity.
Looking at the macro picture that we have major disadvantages in terms of entry barrier to our larger markets like Europe, while our competitors avail benefits of FTAs, zero duty, there is actually a whole maze of things which together work towards competitiveness.
Now the time has also come when the industry has to move towards higher value addition products. As we see, we are still a two-season player in the globe. We don’t produce much high-value products and we are still into cotton products; hence, we need to move into that space where margins are higher.
The industry should focus on newer markets. A huge amount of buying is done by these emerging markets, but we (industry) somehow have hesitation to enter such markets. Our Ministry has in fact identified 12 such destinations across the globe, which are buying garments worth more than US $ 120 billion, but Indians are not much strong in these markets. So, apart from continuous focus on our existing main markets, we need to venture into the newer and non-traditional markets in a big way.
For us, overall interest cost seems to remain high (despite interest subvention kinds of schemes, etc.), but transactional costs are gradually going down; ease of doing business is increasing but there are issues because of which manufacturers need to focus on the factors that are in their hands.
All manufacturers should adopt lean implementation seriously so that they can achieve the required improvements. Secondly, we have to see our manpower differently and provide proper skills to them. This happens when we involve researchers and experts in our whole system. Many times, we think that we don’t need anybody’s help in our business, but coordinating with other people and working together is key for development. The industry also has to understand that social and economic profit can go hand-in-hand.
Information Technology is integral to success today and manufacturers need to explore how much they are into digital space or the extent to which they are using IT in their overall operations. We know very well that margins are thin in manufacturing, so with the use of IT, we can retain margin. We have to join hands to create innovative brands.
E-commerce has a lot of opportunities and is shaping up differently. We have to encash upon this booming domain as branding becomes comparatively easy with the help of e-commerce. If we look at this comprehensively, we can become part of the larger margin area and move from the present thin margin.
AEPC can establish the Common Facility Centre for knowledge sharing with the industry so that manufacturers gain profit in a better way and create value for everybody.
Yes, there is lack of growth in apparel exports and if we look at the situation at the microlevel, India should not be exporting raw cotton or fabric. Our export should only be for RMG mainly.
The issue of real exchange rate could not get enough attention. India has seen a real exchange rate of appreciation of about 20 per cent in last 6-7 years. It is equalling to the lowering of import duty by 20 per cent, which is like a negative import duty for many sectors now. This imbalances the potential of competitive advantage wherever value addition is large. We need to, therefore, change the common perception that strong Rupee is a sign of a strong economy. The East Asian experience is the exact opposite and they realise that weak currency leads to more production and more jobs. Here I am not arguing about artificial depreciation.
There is a need for putting the workers in the centre of productivity and competitiveness. On the basis of my experience and keeping a close watch on the industry, I must say that we should have workers’ colonies or decent housing for them nearby to the factories so that they can commute easily and don’t face fatigue while doing their work.
States like Bihar can offer complete infrastructure free of cost to prospective investors or talented apparel professionals willing to become entrepreneurs for some time and if entrepreneurs succeed, they should pay, otherwise they can leave. This kind of plug and play will encourage start-ups to invest in apparel manufacturing in states where the industry is currently not much developed.