In modern retailing, the textiles and apparel category holds the largest percentage share of participation. Estimates show that around 38% of modern retailing comprises textiles and apparel merchandise. So, it’s a no-brainer to say that if this category improves a great deal, modern retailing advances too proportionately.
Between 1991 and now, many inefficient textile companies have shut shop and have moved on to open doors for real estate development or for infrastructure development to house commercial complexes and malls. In Mumbai one can see the transformation of the old Phoenix Mills, Simplex Mills, Morarjee Mills, etc. into beautiful landscaped complexes or malls (promoting retail!). The downfall of this entire textile-manufacturing sector came when it became non-competitive incurring higher costs while facing the threats of highly competitive manufacturing sources like China. I always used to wonder how our textile manufacturers did not capitalize on their opportunities to integrate forward into garment manufacturing. While on the one hand Tirupur and Ludhiana in India were emerging as manufacturing hubs for hosiery and garments focusing on exports, on the other hand the downfall of the mills in Mumbai was seen at the same time. Why did our Mumbai mills not think about garment manufacturing and exports on a large scale? Strangely none of these units even thought about doing it from various other locations if they had large-scale manpower and industrial relations challenges, especially in Mumbai. The other wonder for me always centered on why the central and state governments could not interfere and revive those large dying units on a war footing, taking adequate care for sustenance by helping companies settle disputes and offer subsidies and tax holidays.
If one looks at China, the government has worked closely with every key sector since 1995, especially with the textiles and garment sector, which in the mid and late nineties was almost on the verge of bankruptcy. We know where the sector has reached today – 24% of the global textiles and garments trade is from China. The government helped organizations settle disputes and lay off workers if efficiencies were not met. The sector was rejuvenated by the infusion of public funds in the form of grants and tax forgiveness, under the directions of the government to facilitate its complete restructuring. The painful restructuring process has ultimately paid off for China.
I agree, there are subsidies for the sector in India too, often planned more when challenges in the global markets are faced. There has been no visible planning by way of introduction of any innovative programmes to build the sector for the next 20 to 30 years with the objective to take it to the ultimate level of competitiveness. Garmenting in India is still at a nascent stage. In spite of the fact that garment is a common essential consumption commodity within the country, there is a levy of 10% excise duty on branded apparel. The government should look at garment manufacturing as a critical area for growth for the future as such a supporting measure will go a long way to further establish the growth of apparel retailing in India. One would expect a roll back of the excise duty on apparel this year. For manufacturing and domestic retailing integrated organizations (with total income more than 10 million rupees in revenue) the government can also look at a subsidy in income tax, down to 25% rather than a common flat rate, as such subsidies are commonplace in progressive economies. If we have to ensure the growth of the textiles and garment sector to compete effectively globally and to increase consumption in India, the government has to think innovatively and out-of-the-box too!
- Dr. Gibson G. Vedamani
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