• Liberalisation and textiles

Liberalisation and textiles

This paper analyses the impact of the elimination of textile and clothing (T&C) quotas in 2005 on India. It finds that while Indian exports of T&C will continue to expand in the presence of the safeguards on China, they will be affected adversely once these safeguards are lifted. The paper also argues that India could emerge much stronger and expand its trade in T&C at a much faster pace, if some of the key domestic structural weaknesses are overcome.

Weaknesses and constraints as identified by the paper include:

• low quality of products
• fragmentation of the industry
• concentration on low- to medium-priced apparel
• long time-to-delivery
• delays in customs clearance
• low level of technology
• unfavourable trends in labour productivity as compared to some competitors
• lack of scale economies
• high costs of inputs and branding.

In order to overcome these constraints the following recommendations are made:

• the government should enable the import of existing technology in addition to investing in research and development
• to minimise lead times, India should further integrate the supply chain and develop strong textile clusters, capable of handling all stages of production in a coordinated manner
• increasing productivity in cotton, capacity in man-made fibers needs to be enhanced
• services-related expertise in designing, marketing, retailing, financing and the gathering of market intelligence on foreign markets should be developed
• the infrastructure should be improved and the inefficiencies in the power sector leading to a high cost of power should be removed
• increased labor market flexibility is required to enable the setting up of mega production plants similar in scale to those in China.

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