Garment exporters fear losing business to Bangladesh, Vietnam

Garment exporters fear that a portion of their business may shift to countries like Bangladesh, Thailand and Vietnam, as a steep increase in local cotton and cotton yarn prices over the last six months has made their products less competitive in global markets.

Unchecked export of cotton and cotton yarn, particularly to countries such as Bangladesh, Vietnam and Thailand that are India’s direct competitors, and even to China, with an advance agreement is causing a local short supply of these raw materials and driving up their prices, they said. These exports are done at a fixed price for six months with assurance of availability.

This in turn is hurting India’s garment exporters who too have six-month agreements with importing countries for the finished products, they said.

“The industry is currently facing a shortage of cotton yarn and fabrics, thus hitting production, employment and exports,” said Lalit Thukral, president of the Noida Apparel Export Cluster. “The steep rise in the price of cotton, ranging from 30% to 60%, over the past six months has also led to increased cost of production, making it even more difficult for the industry to compete globally.”

India’s export of Indian cotton and cotton yarn has increased by 56% in the past six months, whereas apparel shipments to global markets have risen by just 24%, he said. “Had this cotton and cotton yarn export diverted to the domestic market, the Indian apparel export would have increased many times, with proportionate increase in employment generation.”

The industry has urged the government to put a complete ban on export of cotton and cotton yarn, he said, adding that this would enable them to survive in the highly competitive global market while making money available to the industry workers and ensuring cash flow.

According to industry insiders, absence of a free trade agreement with European countries has further aggravated the situation for India. Bangladesh, Vietnam and Thailand have such agreements.

India’s textile and apparel industry provides employment to 105 million people — 45 million directly and 60 million indirectly.

The Indian readymade garment and apparel are made of natural, man-made and synthetic fibres. Natural fibres are cotton, silk and wool. Three-fourths of the raw material used in apparel is cotton, said Thukral.

India levies a 10% duty on imported cotton, which is also hurting local mills.

Domestic prices in certain varieties such as extra-long staple cotton have exceeded international prices, making the local industry uncompetitive, said Ashwin Chandran, chairman of the Southern India Mills’ Association.

“Earlier, the industry had an option of importing cotton and maintaining stability in yarn prices during the off season (July to September). This option is now unviable due to the imposition of 10% import duty,” he said.