Crisil estimates $2-3 billion worth of incremental orders for Indian exporters in FY2021 from crises in East Asia
Industry estimates export of finished textile goods, clothing and fabrics can grow 20-30 per cent as a result of the Coronavirus crisis alone
Western buyers are ready to pay higher prices if orders are fulfilled on time
Government withdrew Merchandise Exports from India from August 1, 2019 onwards
The government is sitting on an estimated Rs 7,000 crore worth of delayed refunds and rebates from GST and RoSCTL
The average differential between a Made in India T-shirt and one made in Bangladesh is about 50 cents ($1.70 against $1.20)
Raja M Shanmugam, president, Tirupur Exporters’ Association (TEA), says although exporters have started getting enquiries from the customers, but they are unable to convert them into orders because they lack the funds to buy raw material owing to these delayed refunds. “If we [exporters] win the confidence of the customers at this difficult time, we can capitalise this opportunity not only for short-term, but also for long-term,” he says.
Exporters urged the government to sign swiftly free trade agreements with EU and the UK, comprehensive economic partnership agreement with Australia and comprehensive economic cooperation agreement with Canada, so that Indian exporters get duty-free benefits. Today, most of India’s competitors —Bangladesh, Vietnam, Sri Lanka, Cambodia — enjoy duty-free status against the 9.6 per cent duty that India-made products face in western markets. Add in high interest and labour costs and the average differential between a Made in India T-shirt and one made in Bangladesh is about 50 cents ($1.70 against $1.20).
The fact is that India has been unable to benefit even earlier when rising costs saw China steadily lost about 5 per cent of its market share. Chinese manufacturers, however, diverted their operations to Vietnam, Sri Lanka and other low-cost East Asian countries and continue to dominate the global market. As a result, India gained only 0.5 per cent share. Therefore, as Sivaramakrishnan Ganapathi, managing director of India’s largest apparel exporter Gokaldas Exports, points out, “Short-term shocks do not translate to business opportunity. The competition among countries is competition among manufacturing ecosystems.”
China’s partial shutdown as a result of coronavirus means that Indian apparel companies will have to look for alternative sources of raw material (including local sources) to replace the Chinese business and this cannot be done very quickly as supply chains take time to build.
“In the short-term, there is a limited extent opportunity but China is also trying to bounce back and firms are indicating they may open soon and will make up for lost time,” Ganapathi adds. The Make in India programme has just lost a giant opportunity.