DEFINING PROBLEM

Being the third largest producer of cotton “king of the fabrics” among other 20 sourcing
destination of apparel and with, India’s apparel export is still declining from almost a decade
and the reason still remains a question.

With a history that stretches back thousands of years, the Republic of India's textile industry
has withstood many challenges to become a key industry and economic contributor. Today, in
the post-Multi-Fiber Arrangement era, the textile sector of that southern Asian country —
bordered by Pakistan, China, Bangladesh, Nepal, Bhutan and Myanmar; and between the
Arabian Sea to the southwest and the Bay of Bengal to the southeast — faces new challenges
and competitors.

India’s global textile share is 4 percent, while the country captures 2.8 percent of the world’s
apparel market. In 2005-06, the sector exported goods worth US$17.1 billion — up from US$14
billion in 2004-05 — or 16.6 percent of the country’s total exports. Among those goods were
ready-made garments, cotton textiles, man-made fiber textiles, wool and woolen goods, silk,
handicrafts, coir and jute.

The share of India’s garment and clothing exports in global market has not risen since since
1994 (2.6%) and in fact declined marginally in 1997. Since then no remarkable growth has been
seen in Indian share in exports to the big buyers namely United States of America and European
Union countries. In last 5 years India had just 4.2% of apparel export share in U.S. market (Ministry of
textiles , Govt. of India) where as Bangladesh surpassed its share up to 11.5% and Vietnam increased its
share from 5.53% to 6.2%. The very same behaviour is observed in the trade with E.U. countries.

U.S. and E.U. accounts fo r over 60% of the Indian textiles and clothing exports, thus these are the key
markets for Indian apparel exports, but, now the dragons and country like Bangladesh whose
countrymen refuge on our land are giving us a competition in these markets.

Factors like cheap labor, technological advancement, availability of fabric, determines the
manufacturing costs of apparels. These factors directly or indirectly along with trade restrictions
influence the selection of sourcing destination.
Since cotton is the most widely used fabric for apparel manufacturing and is sometimes blended with
other warmer fabrics like wool and cashmere so availability of cotton in the market in appropriate
quantity is desired and of foremost concern. Even the demand of cotton apparel is expected to
increase manifolds as China and India are expected t consume more than world’s total cotton
manufacture, this may result in cotton stocks scarcity in the market which will directly influence the
prices of apparel commodities like jeans, t-shirts and etc.. Adding to this Pakistan’s flood this year has
left manufacturers into worries as Pakistan provides the fourth largest stock of cotton’s yield, this also
is expected to contribute in increment in prices of apparels. So the country which will provide the best
quality at affordable price will win the race and will have monopoly till the scarcity ends.

Establishment of World Trade Organizations in 1995 abolished Multi Fiber Agreement (M.F.A.) and
General Agreement of Trade and Tariffs (G.A.T.T.) which really helped various developing countries to
effectively participate in exports of apparel and make a good amount of currency. After removing these
trade barriers namely G.A.T.T. and M.F.A. many countries opened their markets to Foreign Direct
Investment (F.D.I .) which have brought competencies among the manufacturers in the market and they
are now compelled to use advance technology to satisfy the consumer’s demands of quality goods. As it
sets benchmarks for domestic companies to follow in terms of the use of update machinery and gives
managers a relevant expertise. Information and Communication Technology (I.C.T.) can be referred as
its consequent and China is the perfect example of it. Chinese Garment Managers have become
innovative in their chosen business models for their own domestic market as any of their competitors
are in their home market. This advancement in technology and liberal trade policies bring more
international buyers to the domestic markets which catalyzes the exports. Still after joining W.T.O. a
long back in 1995 Indian markets are not yet open for the F.D.I’s.

Cheap labor also accounts for determining the sourcing destination. Noticing its absence from the top 10
importers list for cotton U.S. has outsourced its bulk textile industries to the developing countries with
cheaper labor costs. Instead, the U.S. provides the raw cotton to textile producing industries like China
and then buy the finished cotton fabric. This way United States exploits cheap labor in China and rules
the exporting and importing game.

Specializing in all aspects of apparel manufacturing be it from design, input, through sourcing and
manufacturing, to packaging, to customs and shipping can help any country to enhance its statistical
figures on export profits’ charts. As these specializations result in speed of market for high volume
orders, efficiency and reliability and decreasing lead time.

SUBMITTED BY-

TARUN KUMAR BORA