Tex trauma

More to capturing markets than access

Clearly, there is a problem when the exports of India’s prime foreign exchange earner, the textiles and clothing industry, decline by 22 per cent during April-June 2001. The first step towards solving a problem is, of course, acknowledging its existence. Sadly, if external affairs minister Jaswant Singh’s recent statement — that the Indian textiles industry could hold its own in global markets simply because the country offered a more stable and responsible market — is anything to go by, the government is showing no signs of doing that. During 1990-1998, India’s share in the world textiles market rose from 2.1 per cent to 3.3 per cent. But exports in value terms have shown a slower rate of growth than volumes. Worse still, this year, exports have actually declined by 22 per cent in dollar terms as against three per cent in volume terms. Obviously, price realisations have been taking a hit over the past years. This is partly on account of greater competition: as a result of both the ongoing phase-out of the Multi-Fibre Agreement, resulting in lower quota premiums, and Asian currency depreciations. But empirical evidence also suggests India has lost out to less efficient but preferential suppliers such as Mexico, Canada, and the central and east European countries. Both these developments do not augur well for Indian suppliers over the short term. For, India has no such preferential access, and neither will commercially significant quotas be phased out before Dec 31, 2004.

The post MFA scenario, however, is a mixed bag. While import prices will fall further, Indian exporters will no longer be constrained by QRs. Moreover, India possesses a strategic advantage in the cotton segment, with adequate raw fibre supplies and superior spinning and weaving capacities. The challenge, therefore, primarily lies in surviving the 2001-2004 period and simultaneously beefing up domestic infrastructure in readiness for post-2004. The former requires sensible governmental intervention. In this respect, India’s strategy at Doha was puzzling. A more fruitful approach would have been to engage the US and EU bilaterally on the Agreement on Textiles and Clothing — with appropriate doses of Indian generosity thrown in — rather than demand unilateral concessions at a multilateral forum. That said, there’s more to capturing markets than market access. Policy action on the home front is desperately needed: indisciplined labour, long lead times at ports, delays in customs clearances, high costs of capital all serve to dent India’s competitiveness. There is a pot of gold at the end of the rainbow, but work is needed to capture it. Take a cue from China.