In Jan, 2005 when the Multi Fibre Agreement lapses and it becomes a free for all in the global apparel market how are the Indian companies going to perform ? Are they geared to meet the challenge ? The Frontline takes a look at the knitted garment industry in Tiruppur in Tamil Nadu
THE industry, on the eve of the dismantling of the multi-fibre agreement (MFA) wears a different look now. The bigger units supply their wares to some of the leading retail chains in the developed world such as Wal Mart, Marks and Spencer, C&A and many others. Many of the products wear labels of some of the top brands. [Towards new frontiers]
The Businessworld does not share this optimism and suggests that China is going to make a kill. Jagdish Bhagwati made a note of the mistakes India did in his book In Defence of Globalization. Now there are more problems.
Although the top factories have increased their capacities substantially, by and large the country is not ready for the post-quota advantage. “There is going to be a huge capacity crunch, looking at the volume of business coming our way,” warns Hinduja.
The capacity crunch is the direct fallout of policies that encouraged the proliferation of small units with their inherent inefficiencies, at the cost of large-scale production. While China has created huge capacities and capitalised on economies of scale, India has an incredibly fragmented industry which is simply not geared to meet the challenges of a rapidly changing global industry. There are hundreds of thousands of powerloom units producing 90-95 per cent of the fabrics in the country, while the organised sector turns out just over 5 per cent.
“If we believe we can overrun the world on the strength of powerloom manufacturing and hand-processing units, then we are extremely naïve,” says a textile industry analyst. [Too little, too late]