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Protecting industry from competition is not the answer… Facing challenges will bring in business

by Deepak Mohindra

09-October-2019  |  4 mins read

editorial AOI 1-15 October

Bangladesh and India share a very long history of co-operation and are important allies in the current geopolitical world situation. As SAFTA members, India has accorded Bangladesh with a favourable trade agreement in readymade garments, taking advantage of which apparel exports from the country to India has seen steady growth in the last two years, in particular.

The growing import of garments from Bangladesh is one of the major concerns of the local industry here in India mostly because the exports of garments from India has stagnated at around US $ 16 billion for last many years.

In addition, the local industry too has not been doing well as most of the factories are not equipped to service the growing fashion retail industry, which has moved from an unorganised system of working to a global system of operations that demands on-time delivery and world-class quality.

Few manufacturers who were earlier only into the export segment are trying their best to get entry into the local retail scenario knowing that exports is going through a crisis because of tough competition from countries like Bangladesh, Vietnam, Cambodia, Myanmar and Ethiopia.

However, all efforts are not bearing fruits, primarily because these manufacturers have not been able to adjust to the market demands for small quantities and tight pricing. Further, the payment system of local retail is such that money comes to them 60 days after delivery, unlike in exports where payments are released immediately after shipment is on-boarded.

The reality of Indian manufacturing and its crises need to be seen in a wider context. Also, it is important to understand that as SAFTA member, India has an obligation to reduce a very lopsided pro-India balance of payment with Bangladesh.

While Bangladesh last year imported US $ 8 billion worth of merchandise from India of which US $ 2 billion was in cotton, US $ 350 million was in yarn and US $ 40 million was in fibre; in return, India imported US $ 450 million worth of textile materials including apparels.

India has a huge domestic fashion retail market, projected to reach US $ 115 billion by 2026. It is big enough to absorb not only local manufacturing, but also exports from many other countries. Even China, which is a normal tariff country is exporting US $ 1,000 million worth of garments to India, clearly highlighting the demand being generated by local retailers/brands.

The preference of where to buy from is not only price-driven, but is also determined by critical factors like fast delivery, quick response time, quality and commitment. It is unfair to blame increasing apparel imports from Bangladesh as a factor for low business, instead the manufacturing industry needs to learn and show its adaptability to change and accept challenges.

Recently a Hong Kong-based company – Epic Group, has committed to invest US $ 20 million in India to take advantage of the growing fashion retail market. From what I hear, many more companies are also exploring such options.

It is time for Indian companies to accept ground realities. I am sure that even an Indian company reaching US $ 1 billion exports and employing over 1 lakh people if managed well can be highly competitive in the domestic arena. What is required is the will to gun for the business.

The answer does not lie in restrictive, proactive and cocooned business environment, but in bringing about changes and making things better!

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