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Indian Industry Eyes Latin America, Japan

Shipments decline to US and Europe, exporters in India are looking to other regions for business.

NEW DELHI — As India’s apparel exports to its traditional and biggest markets — Europe and the U.S. — continue to fall, the industry here is setting out to woo buyers in untapped countries, including Japan and Latin America.

This was borne out at the India International Garment Fair, held here July 15 to 17. Among the 200-odd foreign buyers, organizers said there was a record 20 buyers from Japan, while two countries, Argentina and Uruguay, were represented for the first time.

Also this month, India’s textiles minister Dayanidhi Maran led a trade delegation to Japan to encourage textile firms to invest in India.

But the policy of seeking out new markets is at an early stage. Indian garment manufacturers exhibiting at the fair said they had been hit hard as clothing brands in the U.S. and Europe cut back on orders — or canceled them altogether.

India’s garment exports rose 4.6 percent to $10.13 billion in the year to March. But this missed a 14 percent growth target, according to the Apparel Export Promotion Council.  While the fiscal year started well, exports began to wither last fall, after the financial crisis froze credit markets and sent developed economies into recession.

There are signs this year will be no better: Textile and clothing exports to the U.S. — India’s biggest market — fell more than 14 percent between January and April.

Indeed the industry, which constitutes some 20 percent of India’s exports, is estimated to have lost nearly 1 million jobs in the past year. A recent survey of garment exporters in India found many have temporarily shuttered their factories or cut production to avoid a pile up of inventory.

Ajay Gupta, managing director of Manglam Fashions, a company based in Jaipur, Rajasthan, said he considered his company fortunate to have lost only one of its regular customers to bankruptcy in recent months. German department store chain Woolworth GmbH & Co filed for bankruptcy this April.

“Other firms with most of their buyers in the U.S. have had it a lot worse,” he said. “Still, we are expecting much lower sales this year. We set out at the beginning of last year expecting growth of 30 percent, but sales were flat.”

In a bumpy economic climate in which buyers are looking to cut costs any way they can, India has lost out to other, more price competitive countries that have lower infrastructure and labor costs, including Bangladesh and Vietnam.

India’s archaic labor laws are rated by the World Bank as being among the world‘s most rigid. They impose numerous restrictions over the number of hires, conditions for restructuring and working hours.

“They make it tough to compete, but so do the excessively high taxes here,” said Dinesh Jain, owner of Mumbai-based Dolphin Clothing, which manufactures for a number of budget U.K. brands, including Primark and Peacocks.

Like many developing countries, India is keen to develop its centuries-old textile and apparel industry. Labor-intensive and relatively low-skilled work, apparel manufacturing offers a useful transition from the ailing agricultural sector — which still employs 60 percent of the country’s 1 billion-plus population — into manufacturing, where India’s future employment growth is seen.

But if garment manufacturers were expecting help from the government in last month’s annual budget, they were disappointed.

None of the significant measures for which the textile industry had lobbied — including the removal of all excise duties on man-made fibers and an increase in funding to a scheme that allows manufacturers to upgrade technology — were announced.

On the domestic front, meanwhile, apparel manufacturers are looking for ways to tackle falling sales.

India’s organized retail sector — which is estimated to constitute less than 5 percent of a market valued by consultants AT Kearney at $511 billion — has suffered in recent months, as shoppers have cut back on nonessential items.