Indian Official Says Fashion Sector at Risk

At the World Economic Forum, India’s minister of commerce and industry, Kamal Nath, said Indian textile, apparel and jewelry industries were hurting.

DAVOS, Switzerland — India’s minister of commerce and industry, Kamal Nath, said Thursday at the World Economic Forum here that the world’s second-largest emerging economy was projected to grow by 7 to 7.5 percent this year, but the country’s textile, apparel and jewelry industries were hurting.

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Nath’s economic projection was far more bullish compared with the International Monetary Fund, which on Wednesday lowered its forecast for India by 1.2 percent from its November prediction. The IMF now expects the Indian economy to expand by 5.1 percent in 2009 and 6.5 percent in 2010. IMF economists also estimated the Indian economy of 1.1 billion people grew 7.3 percent last year, a slowdown from the previous year’s 9.3 percent.

Nath admitted the global economic crisis has impacted India and noted that some sectors such as gems and jewelry and textiles and apparel are suffering from the growth slump and “will take a hit.”

“Demand compression taking place in the West is the main reason for this,” Nath said.

He said New Delhi expected these sectors to see about 500,000 jobs lost. But some Western economists and labor market analysts said the job losses in these sectors may be much higher.

Nath pointed out that the impact is coming from foreign buyers who have credit and liquidity problems. He said India’s textiles and apparel sector will continue to modernize, but added decreased demand in major Western markets was “affecting all exporters, not just India.”

The minister noted the poor performance in these sectors was expected to be balanced by robust performances in areas such as information technology, construction and pharmaceuticals.

On the trade front, Nath said export growth in value terms was likely to increase 17 percent this year, below the 25 percent gain posted last year, to reach about $180 billion. He said imports, which increased 36 percent in 2008, are expected to “continue on track” this year.

Nath stressed much of the growth will come from expansion in domestic demand, which has been boosted by recent government stimulus packages.

“Growth in government spending and in domestic demand will balance the reductions in [some] exports,” he said.

Nath said protectionism was a definite threat in the current economic slump in the U.S. and Western Europe, and noted jobs will not be saved in the rich nations by putting up trade barriers. With regard to the Obama administration, Nath said, “we expect leadership from the U.S. on conclusion of this [Doha] round.”

Trade ministers from 20 key trading nations and World Trade Organization director-general Pascal Lamy are to meet on the sideline of the Davos forum Saturday to explore ways to inject momentum into the troubled Doha global trade talks, launched in November 2001.

Former U.S. President Bill Clinton told business and political leaders at the annual forum that, “There’s a lot of fear out there in the economy. So I don’t think that now is the best time in the world to get new trade agreements. But I also believe that intelligent people all over the world will see that it is not necessarily the time to pick fights, either. We have to get out of this together.”

One of the world’s most influential business leaders, however, begged to differ with Clinton’s assessment.

“Well, it’s obviously not the best time to get agreements, but it’s absolutely the necessary time to get agreements,” said Peter Sutherland, chairman of Goldman Sachs International.

Sutherland, a former WTO director-general, said the recent failure of the Doha global trade talks “is nothing short of disgraceful.”

“The world badly needs a confidence boost,” he said. “It also needs an antidote to the protectionism, which is already evident in the responses to the global slowdown.”