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The Indian Apparel Market and the Challenges

Relevancy

  • G.S. Paper 2

Why in news? ­

  • The union government raised import levies on 50 items from fiber to apparel.

How is India’s apparel import?

  • Readymade garments (RMG) imports increased from Rs. 2,643 Crore in 2013-14 to Rs. 4,983 Crore in 2017-18 amounting to a compound annual growth rate of over 17%.
  • Bangladesh and China, with whom India shares porous borders, accounted for about 64% of India’s Ready Made Garment (RMG) imports in 2017-18.
  • China’s share in global apparel exports is on a gentle decline.
  • India has been losing out to Vietnam and Bangladesh, with the respective shares of the three countries at 4%, 5% and 6%.

Why India decided to hike levies on import?

  • To address the shocks from the climate of protectionism across the world, India has decided to impose levies.
  • Most of the imported items will attract a rate of 20%, against 10% now.
  • Since India has free trade pacts in place with Bangladesh and our less significant RMG import origins Vietnam and Cambodia, the higher tariffs are unlikely to come into force with respect to these countries.
  • The hike in duty will contain direct Chinese imports, but not so much the influx from Bangladesh.
  • Lower RMG imports from China over the next few years will open up a section of the domestic market for local players.

What are the challenges faced by the Indian apparel market?

  • China could step up its relocation of apparel making into Bangladesh and ASEAN countries.
  • It a process that is already underway as a result of rising labour costs in China and a larger move by its industries to move up the skills and technology ladder into sectors such as electronics.
  • Despite the size of the Indian market, China has generally preferred to export its way into India rather than set up facilities here.
  • India too is not being entirely comfortable at the latter prospect, for strategic reasons.
  • India’s textiles and apparel industry has been not been impacted much by labour costs.
  • But it has largely been hampered by logistics shortfalls and tax-related hassles.
  • Besides, the price of cotton is a factor of concern in an industry where margins are under relentless pressure.
  • Union government could pitch in with housing costs for labour, as in China’s clusters.
  • India should take advantage of the large domestic market to stay competitive despite the shocks from shifting global market trends.

More Production And Less Consumption: India’s Surplus Scenario

Relevancy

  • G.S. Paper 2

What is the issue?

  • India has moved successfully from famines and agricultural shortages to surplus which is why there arises a demand of shift in the policy approach to balance among production, consumption and farm income.

What is the current situation?

  • India produces food more than what it consumes.
  • The country has 68 million tonnes of wheat and rice in stock which is more than twice what buffer stocking norms require.
  • Sugar output this year is expected to be 32 million tonnes when usual consumption is 25 million tonnes.
  • Potatoes production has increased by 80% in a decade, while the population has grown by less than 20%.
  • Farmers leave unwanted potatoes in cold stores, which is then dumped in tonnes in the open to rot.
  • Milkproduction has been growing at four times the rate of population growth.
  • Farmers, in protest at low prices, are pouring tanker-loads of surplus milk down highways.

What are the concerns and challenges?

  • It is flawed to have surpluses when per capita consumption of most food items is low.
  • The government could take steps to boost consumption.
  • But the consumption levels are mostly in relation to the income levels.
  • It is thus a challenge, as the main foodgrains are already being sold only at 10% of cost.
  • So, other options at absorbing the excess production should be resorted to.
  • g. milk could be included in the mid-day meal programmes in schools
  • Export – Surplus could be exported, but India already happens to be the leading exporter of rice.
  • It is also a significant exporter of some other food items.
  • When exporting rice and sugar, large quantities of water used in their production are also exported.
  • This is a concern given the country’s water shortage becoming a crisis.
  • India’s agriculture remains uncompetitive because of low productivity.
  • g. China grows two-and-a-half times the tomatoes that India does, on slightly higher acreage.
  • This is something to be addressed but when productivity goes up, the problem of surplus gets worse.
  • g. sugarcane: billions of rupees are already owed by sugar mills to cane growers due to higher production and low prices
  • The latest hike in rice procurement prices and states offering subsidies will only encourage more production.
  • All of it is aimed at helping farmers to earn minimum incomes, or protecting them from market vagaries.
  • But there are other shortfalls that make the existing production unremunerative.

What should be done?

  • Lasting solutions involve changing the demand-supply mix for the surplus products.
  • There is a need for diversification of cropping into new products.
  • It may include those crops which the country imports like oilseeds and pulses.
  • The existing measures at this front are not enough and should be accelerated.
  • g. output growth rate for pulses, after years of stagnation, has reached a 4%, when looked at over a decade.
  • Likewise, oilseeds output growth has been slower, however a change from the earlier stagnation.
  • The recent Operation Green aimed at stabilising the fluctuations TOP production could help.
  • The policies should thus transform from a shortage mentality to that of surplus scenarios at present.

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