The challenges of the South Asian textile story
- South Asia became a major player in the global textiles and clothing market with the onset of the third wave of global production.
- Supportive industrial policy was an instrumental factor in the 1990s, with zero duty on raw material and capital machinery, as access to global markets led to the industry’s boom.
- Bangladesh overtook India in exports in the past decade as Indian labor costs resulted in products becoming 20% more expensive.
Standing of countries
- Bangladesh is third in the rank of global exporter due to Lower production costs and free trade agreements with western buyers.
- The progress of India and Pakistan in readymade garments is recent when compared to their established presence in textiles.
- India holds a 4% share of the global textile and apparel market, and is in fifth position.
- India has been successful in developing backward links, with the aid of the Technical Upgradation Fund Scheme (TUFS), in the cotton and technical textiles industry.
- However, it is yet to move into man-made fibers as factories still operate in a seasonal fashion.
- Pakistan remains very focused on cotton products; it falls behind due to skilling and policy implementation issues.
- Bangladesh has been ahead of time in adopting technology.
- Bangladesh also concentrates on cotton products, specializing in the low-value and mid-market price segment.
- The country faces the challenge of high attrition and skilling which results in higher costs.
- Sri Lanka attained the most progress in ascending the value chain.
- Progress in training, quality control, product development and merchandising are attracting international brands to Sri Lanka.
In leap ahead, the hurdles
- The Fourth Industrial Revolution has been shifting focus from production machinery to integrating technology in the entire production life cycle.
- In the days ahead, comprehensive restructuring can be expected in systems’ adaptation to human and market needs.
- ADB anticipates the challenges of job losses and disruption, inequality and political instability, concentration of market power by global giants and more vulnerable to cyberattacks.
- With a 7% unemployment rate, India faces the challenge of job creation in the wake of increased automation.
- The integration of skilling and technological investments will play a vital role in phasing out obsolete jobs, and adapting to new ones.
- It is imperative to ensure living wages and ease of access to education.
- Digitalisation and automation in areas such as design, prototyping, and production are key in order to stay abreast, and in controlling production quality and timely delivery.
- Quick transportation becomes important in costing control, as reshoring and near-shoring gain currency.
- While a transition may be easier for large factories, medium and small-scale entities may suffer.
- Sustainability is an important consideration for foreign buyers.
- Bangladesh’s readymade garments initiated ‘green manufacturing’ practices to help conserve energy, water, and resources.
- Textile and apparel effluents account for 17%-20% of all water pollution.
- Many Indian players are focusing on input management over tailpipe management.
- Sustainable practices such as regenerative organic farming (that focuses on soil health, animal welfare, and social fairness), sustainable manufacturing energy (renewable sources of energy are used) and circularity are being adopted.
- The Indian government is also committed to promoting sustainability through project sustainable resolution.
- Tax exemptions or reductions in imported technology, accessibility to financial incentives, maintaining political stability and establishing good trade relations are some of the fundamental forms of support the industry needs from governments.
The labor lead
- Access to affordable labor continues to be an advantage for the region.
- India’s potential lies in its resources, infrastructure, technology, demographic dividend and policy framework.
- The U.S. trade war on China owing to human rights violations along with its economic bottlenecks, opens doors for India and Pakistan as they have strong production bases.
- India has a big supply — from raw material to garments.
- Bangladesh has also risen as a top exporter in a cost competitive global market.
- Labor law reforms, additional incentives, income tax relaxations, duty reductions for man-made fiber, etc. are other notable moves.
A way forward
- Cotton product dependency and a focus on only major export destinations may diminish the market scope for South Asia.
- Diversification with respect to technology, the product basket and the client base need attention.
- Adaptability in meeting the demands of man-made textiles, other complex products and services are also important.
- Newer approaches in the areas of compliance, transparency, occupational safety, sustainable production, etc. are inevitable changes in store for South Asia to sustain and grow business.
- Reskilling and upskilling of the labor force should also be a priority for the region to stay aloft in the market.
- Finally, there is a need for governments’ proactive support in infrastructure, capital, liquidity and incentivisation.