Indian apparel firms lose out to weaker rivals
Tuesday, 10 March 2009
MUMBAI, Mar 9 (Reuters): India's apparel industry is losing business from US and Europe to Vietnam, Cambodia and Bangladesh, which enjoy stronger government support, industry participants said.
An incentive on cotton exports from India and more stringent labour laws in the country hamper profitability of apparel firms, restricting their ability to cut prices. An import duty charged by the European Union is also cutting margins, they said.
"Because of cost competitiveness and export incentives, orders are going to neighbouring countries," said D.K. Nair, secretary-general of the Confederation of Indian Textile Indutries .
The global slowdown has already hurt the industry, which is gearing up for a sharp fall in exports and is expecting over a million job losses in the year ending March at a time when buyers in major countries are looking for low-cost alternatives.
Countries like Bangladesh and Vietnam have duty-free access to Europe, but Indian apparel exporters have to pay a 12 per cent customs duty to members of the European Union, squeezing their margins further, Nair said.
"That's a lot of money lost as work on margins of only 2-3 per cent and have to lose 12 per cent on that," he added.
"We have logistic bottlenecks in the country, which many of the lesser developing countries don't have," said Devangshu Dutta Chief Executive of Third Eyesight, a textiles and retail consultancy.
"For them, the importance of the garment industry is very high, in our case textiles... is just one of the products which gets handled," he added.
The lesser developed countries are also at an advantage due to cheaper labour and competitive pricing, said Sunil Khandelwal, Chief Financial Officer of textiles and garments maker Alok Industries Ltd.
India apparel exports is expected to come in at $8.5 billion for the year ended March, down from about $9.5 billion last year, said Rajendra Hinduja, Executive Director at Gokaldas Exports India's largest apparel exporter.
Falling orders have resulted in shut down of units across the industry for many small and medium enterprises, affecting jobs.
An incentive on cotton exports from India and more stringent labour laws in the country hamper profitability of apparel firms, restricting their ability to cut prices. An import duty charged by the European Union is also cutting margins, they said.
"Because of cost competitiveness and export incentives, orders are going to neighbouring countries," said D.K. Nair, secretary-general of the Confederation of Indian Textile Indutries .
The global slowdown has already hurt the industry, which is gearing up for a sharp fall in exports and is expecting over a million job losses in the year ending March at a time when buyers in major countries are looking for low-cost alternatives.
Countries like Bangladesh and Vietnam have duty-free access to Europe, but Indian apparel exporters have to pay a 12 per cent customs duty to members of the European Union, squeezing their margins further, Nair said.
"That's a lot of money lost as work on margins of only 2-3 per cent and have to lose 12 per cent on that," he added.
"We have logistic bottlenecks in the country, which many of the lesser developing countries don't have," said Devangshu Dutta Chief Executive of Third Eyesight, a textiles and retail consultancy.
"For them, the importance of the garment industry is very high, in our case textiles... is just one of the products which gets handled," he added.
The lesser developed countries are also at an advantage due to cheaper labour and competitive pricing, said Sunil Khandelwal, Chief Financial Officer of textiles and garments maker Alok Industries Ltd.
India apparel exports is expected to come in at $8.5 billion for the year ended March, down from about $9.5 billion last year, said Rajendra Hinduja, Executive Director at Gokaldas Exports India's largest apparel exporter.
Falling orders have resulted in shut down of units across the industry for many small and medium enterprises, affecting jobs.