2. Globalization In The Apparel Industry: A Study of Preparedness of Indian Industry
Dr. Pradeep Joshi
Asso. Prof.,NIFT, New Delhi
Dr. S.M Ishtiaque
Prof., IIT, New Delhi
Dr. Sudhir Jain
Asso. Prof., IIT, New Delhi
7th IFFTI Annual Conference 2005 at Bunka University ,Tokyo, Japan

3. Trade Restriction on Textile and Clothing
The Cotton Arrangements ( )
The Multifibre Arrangement (1974 – 1994)
Agreement on Textiles and Clothing (1995 – 2004)
WTO Era- 1st Jan 2005 onwards

4. The Multi-Fiber Arrangement (MFA) has governed international trade in textiles and clothing since 1974.
The MFA enabled developed nations, mainly the USA, European Union and Canada to restrict imports from developing countries through a system of quotas.
The Agreement on Textiles and Clothing (ATC) mandated progressive phase out of import quotas established under MFA &
The integration of textiles & clothing into the multilateral trading system before January 2005.

5. Total world trade in Textiles & Clothing ( value in US$ Millions)
Year
1990
1995
2000
2003
Textiles
104354
152319
154366
169422
Clothing
108129
158353
197498
225940
Source: WTO

6. Leading exporters of clothing
2003
% Share
China
52.06
23.0 EU
19.04
8.4
Turkey
9.93
4.4
H.Kong
8.20
3.6
Mexico
7.34
3.2
India
6.45
2.9
USA
5.53
2.5
Bangladesh
4.32
1.9
Indonesia
4.10
1.8
Romania
4.06
Source: Compiled from WTO data

7. Leading importers of clothing
2003
% share
USA
71.27
31.5 EU
60.39
26.7
Japan
19.48
8.6
H. Kong
15.94
7.0
Canada
4.50
2.0
Switzerland
3.92
1.7
Russia
3.71
1.6
Mexico
3.03
1.3
S. Korea
2.49
1.1
Australia
2.10
1.0
Source: Compiled from WTO data

8. TRENDS IN WTO ERA

9. Apparel imports to US market
( January- June, 2005)
Imports
2004
2005
change
% change
WORLD
35,466
38,827
3,361
9.48%
TOP TEN COUNTRIES:
CHINA
97.15
MEXICO
3,879
3,633
-246
-6.34%
HONDURAS
1,516
1,530 14
0.89%
BANGLEDESH
1,056
1,284
228
21.54%
SALVADOR
967
956
-11
-1.18%
VIETNAM
1,454
1,440
-14
-0.95%
DOM REP
1,133
1,086
-46
-4.10%
INDONASIA
1,386
1,595
209
15.06%
INDIA
420.08
37.59
(Source - Compiled from US DEPARTMENT OF COMMERCE, OFFICE OF TEXTILES AND APPAREL)

10. US MARKET (Jan-June 2005 over corresponding period in year 2004.)
Import of apparel in US market has increased by 9.48%.
There is tremendous growth in imports from
China(94.33%)
India(34.44%),
Bangaladesh(21.54%)
Negative growth in imports from Mexico,Dominian Repubic etc.

11. Apparel imports into US: Competitive scenario
Qty in million Metre square value in US$ million
From
Jan-Jun 04
Jan-Jun 05
% change
Qty
value
India
312.7
413.75
32.31
37.59
China
1229
125.1
97.15
Bangladesh
425.0
858.82
512.90
20.66
22.73
Pakistan
237.4
497.00
265.18
551.66
11.69
11.00
Sri Lanka
190.
678.44
225.45
795.99
18.39
17.33
(Source: Compiled from trade data)

12. Competitive position in US market
China is highest gainer of phasing out of quotas in US market with % growth in volume and 97.15%(value).
The imports from India have increased by 32.31%(quantity) and37.59%(value).
The other gainers of WTO era are Bangladesh (22.73% value growth) followed by Sri Lanka (17.33% value growth) and Pakistan (11% value growth).

13. Apparel Imports to EU market
(Value in million Euro)
Apparel type
Jan-Jun 04
Jan-Jun 05
% change
Knitted
-3.4
Woven
-2.4
total
-2.9
(Source: Compiled from trade data)

14. EU Market (Jan-June 2005 over corresponding period in year 2004.)
The trends in EU market reflect a decrease of (2.9%) in imports.
The negative import is seen in knitted (-3.4%) as well as woven (-2.4%) apparel.

15. Apparel import into EU from India
(Value in million Euro, quantity in million kg)
Apparel type
Jan-Jun 04
Jan-Jun 05
% change
Qty
Value
Knitted
54.99
627.2
65.83
688.9
19.71
9.84
Woven
40.26
736.1
42.87
872.5
6.48
18.53
total
95.25
1363.
108.7
1561.
14.12
14.53
(Source: Compiled from trade data)

16. Position of India in EU market
The imports from India has increased by 14.12%(qty) and 14.53(value).
The growth in imports is 19.71%(qty) for knitted and 9.84%(value) while there is growth of 18.53%(value) for woven apparel imports in EU during this period.
Import of knitted apparel has increased in quantity while woven apparel have better growth in EU imports in value.

17. Apparel import into EU from other Asian Countries
(Euro mn, qty mn kg)
Apparel type
Jan-June 04
Jan-June 05
% change
Bangladesh
Knitted
37.17
59.30
59.6
Woven
70.34
76.70
9.1
107.51
136.00
26.5
China
212.92
312.77
46.9
300.52
467.81
55.7
513.44
780.58
52.03
Pakistan
11.94
11.30
-5.3
7.85
7.46
-5.0
19.79
18.76
-5.2
Sri Lanka
5.83
5.59
-4.1
12.19
13.34
9.4
total
18.02
18.93
5.0
(Source: Compiled from trade data)

18. Competitive position in EU market
The imports from China have increased by 52.03%(value) followed by Bangladesh (26.5%(value) and India.
The imports from Sri Lanka have increased marginally(5%) while imports from Pakistan have decreased by 5.2%

19. Summary…… India & China are biggest gainers in WTO era
Import patterns are set to change in favour of Asian countries.

20. INDIAN APPAREL INDUSTRY: OVERVIEW

21. Indian Textile & Clothing in World Trade
India has 3.8% share in world textile & 2.9% in clothing trade.
Source: Compiled from WTO

22. India’s Clothing Exports
The exports of clothing is increasing with increase in share in EU and US markets . EU & US are the largest market of clothing exports from India
Source: compiled from AEPC Handbook of Statistics.

23. UVR of Clothing Exports
Average UVR of clothing exports from India is around $ 3.5.
Source: compiled from AEPC Handbook of Statistics.

24. Productivity Levels of Clothing Firms
The productivity for most of the clothing items is relatively low in India. Hong Kong, Taiwan, China are having much higher productivity than India
Source: CII Accenture “Textile Industry: Road to Growth” Report- 2002

25. Summary Increasing percentage share of clothing in world trade
Indian textile & clothing trade is concentrated more on textiles
EU, China are leading exporters of clothing.
EU, US and Japan are leading importers of clothing.

26. India’s trade is for low value items in clothing
Productivity levels as well as investments in clothing firm are relatively low in India.
With integration of textile and clothing trade into WTO, the trade is going to be liberalized.
Increasing competition, decreasing prices, shifting trade pattern are expected in post MFA scenario.

27. Research Design Sample Size
Primary data collection was done through response of garment exporters, fabric manufacturers and buying houses using three separate structured questionnaires.
Sample Size
Garment Exporters
145
Fabric Manufacturers 69
Buying Houses 38

28. COMPETITIVENESS OF INDIAN APPAREL INDUSTRY: SURVEY FINDINGS AND ANALYSIS

29. Average Price (FOB) for Different product Categories being Exported
or Sourced from India
(Response of Garment Exporters)

30. Average Price (FOB) for Different Product Categories being exported or Sourced from India
(Response of Buying Houses)

31. Productivity Level for Clothing Firms ( Response of Garment Exporters )

32. REASONS FOR LESSER FOCUS OF INDIAN EXPORTERS ON EXPORT OF HIGH VALUE ADDED PRODUCTS FROM INDIA

33. Perception Difference between Buying Houses & Garment Exporters

34. Indian Textile Industry: Overview

35. Sector-Wise Production of Cloth
The production of fabric from powerloom has increased while that from mill sector has reduced in last two decades.
Source: compiled from Compendium of Textile Statistics

36. Fibre Mix
The international demand of textile is more of MMF while the production as well as exports from India are of Cotton indicating a mis-match.
Source : KSA Analysis , 2000

37. PERCEPTION ON AVAILABILITY OF FABRIC FROM VARIOUS SOURCES

39. Response of Garment Exporters

40. Response of Buying Houses

41. Summary
Indian Clothing industry primarily caters to lower end of the market.
The clothing manufacturing in India has lower productivity
Indian clothing manufacturing industry is less competitive due to lower productivity, less research and development effort, technology, non-availability of finishing facility and is not being able to move up in the value chain.

42. The unfavorable cost competitiveness is also caused due to non-availability of raw material (fabric) particularly MMF which is being increasingly imported from China, Taiwan and Korea.
The increasing import of fabric is not only affecting the cost competitiveness of Indian clothing industry but it is also affecting textile (fabric) industry

43. INITIATIVES TO BE TAKEN TO FACE COMPETITION IN INTERNATIONAL MARKET

44. Comparison of Responses from Garment Exporters & Buying Houses

45. To Conclude…….
To face competition in WTO era the focus on product development & design is needed which requires investment into latest technology & focus on better sources of raw material.
Clothing manufacturers are required to make efforts for changing the perception of being producer of basic items.
Product specialization is required to be built up. The need is to have specialization in knits along with woven

46. New markets (besides US & EU) are to be explored
…Contd
New markets (besides US & EU) are to be explored
Indian fabric is preferred for 100% cotton, while for synthetics China, Taiwan & Korea are becoming sourcing base due to cheaper price and superior quality. The requirement of clothing industry is for consistency in quality and quantity, wider width and lower cost.

47. …Contd
India’s fabric sector needs to become competitive by investment in latest technology.
The government also needs to intervene by having a competitive policy framework in tune with other competitive countries in the world.

48. Thank You! Dr.Pradeep Joshi Department Of Fashion Management Studies
National Institute of Fashion Technology
New Delhi