| India is
poised to be the next big winner after China now
that the multifiber agreement, which dictated terms
in garment trade for the past 30 years, has finally
expired. Although China will gain the major share in
global garment exports, India is well on its way to
becoming the second-largest supplier to the United
States and the European Union in the post quota
regime, much to the detriment of other
garment-exporting countries in Asia.
India is currently the sixth-largest apparel
exporting country in the world, with estimated
exports for 2004 amounting to US$5.5 billion, an
increase of about 12 percent over 2003. The industry
has been growing at an average rate of 10 percent
for the past three years. But with the quota system
now terminated, the export growth rate is projected
to double in 2005. All apparel exports are expected
to reach US$6.6 billion by the end of the year.
Suppliers in India are especially upbeat about
exports in the quota-free era, mainly because more
than 95 percent of garments shipped from the country
go to former quota-restricted markets of the US, EU
and Canada. In 2004, the three regions combined
absorbed US$5.2 billion worth of India-made
garments
almost 95 percent of total exports in the
product line. In 2003 too, these main export
destinations dominated India's garment trade,
accounting for US$4.6 billion worth of apparel
exports, out of a total of US$4.8 billion.
According to a WTO study, India's share of the US
apparel market is forecast to increase from the
current 4 percent to 15 percent, and from 6 percent
to 9 percent of the EU garment market, in the next
couple of years.
Women's garments comprise a major portion of
apparel exports from the country, accounting for an
estimated 45 percent of shipments. The product
category is also expected to register the highest
export growth rate in 2005.
One of India's main advantages as a source for
women's garments lies in its large manufacturing
base of yarns and textiles. The country is the
third-largest producer of raw cotton after China and
the US, and among the world's largest producers of
cotton and manmade yarns and fabrics. This, coupled
with the availability of relatively low-cost skilled
labor and qualified designers, reinforces India's
position as a strong competitor in the quota-free
era.
A number of makers also expect a partial shift of
US buyers from China to India in a bid to reduce the
risk of sourcing entirely out of one country. The
demand growth, however, will result in intense
competition to the extent that suppliers in India
will have to improve quality, drop prices, add more
value to their garments and shorten delivery lead
times in order to compete with domestic as well as
international counterparts.
While China is the most formidable force in the
world's garment industry, India's niche specialty in
hand-embroidered women's garments gives it an edge
over China. Nonetheless, China is no doubt India's
biggest competitor in other garment categories that
do not have much scope in terms of embellishments,
such as knits, sleepwear and business suits.
Internal competition might in the long-run result
in slight consolidation in the industry, as
suppliers unable to bear price and quality pressures
will close down. Makers who are able to offset price
reductions with considerable increases in export
volume and a reduction in overall production cost,
will be winners in the post quota apparel battle.
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