Indian Apparel: Caught Between an Old Policy and Need to Brand as Sourcing Destination

The existing Foreign Trade Policy of India is outdated by two years, but given the global trade situation—first hit and then exacerbated by the COVID-19 pandemic—is showing no signs of improving, it might be a while before a new FTP sees the light of day. Meanwhile, can India do something to brand itself as an attractive sourcing destination? Buying agents weigh in.

Subir Ghosh

22 April 2022

5 minutes

For exports—especially those of apparel—to do well, many things need to be in place. All these then operate within a framework, held together by a set of guidelines or other parameters. This framework usually takes the shape of a Foreign Trade Policy (FTP). The hitch: India’s new FTP is yet to be announced, with the earlier one of 2015–20 still being kept afloat.

Earlier this month, India extended the existing FTP by another six months till 30 September to ensure policy continuity in external trade. The current FTP 2015–20 had come into force on 1 April 2015, and was to be valid for five years. The new FTP was deferred in the backdrop of the COVID-19 pandemic first to 31 March 2021, then till 30 September 2021, and thereafter to 31 March 2022 with global trade still being affected by lockdowns, supply chain bottlenecks and trade wars.

Opinion is divided on whether a new one is needed right away, or whether Indian apparel exporters can make do with the current one till the global trade situation stablises—if at all.

Sanjeev Jain, President and CEO of Noida-based TQM Global Buying, sees it this way: “An FTP provides a set of guidelines that helps the country achieve its domestic production and export goals. The Indian economy continues to recover from the effects of COVID-19, which had almost every industry grappling (at straws) and struggling for sustenance. The FTP 2021–26 of India was expected by exporters to provide some relief. The government must now focus on boosting the exports sector, though we feel that the government still stresses more on domestic industry than exports.”

Jain continues: “Industry expects the government to help invest in upgrading infrastructure such as ports, warehousing, testing, certification centres, among others, to stay ahead of technology-advanced countries such as China. Many Asian countries get GSP benefits and duty-free export benefits to several countries like the UK, Australia, Canada and other European nations. The government should plan similar sops for Indian manufacturers as well, so that customers get cheaper imports from India as compared to competitors, thereby growing our exports.”

Vishal Dhingra, President of Speciality Merchandising Services and Chairman of Buying and Sourcing Consultants, wants to see a better playing field “for our industry. As a Co-Chair at the PHD Chamber of Commerce and Industry, we have made several representations with the government. We have shared the concerns of the industry and also shared various suggestions which the government received very positively. We are hoping that those will be added to the eventual FTP. The current regime is very open to new ideas.”

However, there is no pressing need for a new FTP right away, though some interventions are needed, according to Venky Nagan, retired Chief Executive Officer of the Hong Kong-based Asmara Group. Nagan argues, “Even though the old FTP is in effect, several policy decisions are being taken to ensure that the policy keeps our Indian industry competitive, modern, relevant (PLI for MMF is one such example). In the new policy, on behalf of the Indian RMG industry, we would like to request for a 7–8% incentive on FOB value of MMF products. This will kickstart the production of MMF garments used in the sports-yoga-active-outdoor-extreme activities. We would also request a "collaborator bonus" for every foreign collaborator who joins our MMF category factories.”

MS Alam, President and CEO of Global Sourcing India, based out of Moradabad in Uttar Pradesh, is more categorical, as he insists, “The government of India should now make its new policies on time. If the government brings in some good policy, then the business of India will increase four times. Many customers are looking towards India, but our own costs are increasing every day. If the prices of our products can attract them (buyers), this business of ours will run into many billions of dollars. The government should also restart the old drawback and other schemes.”

Agrees Jain: “The export incentives i.e. drawback and other schemes which are now reduced to a meagre 2–3% need to be brought back to their original levels, thereby boosting exporters and manufacturers to work on lower margins as earlier and grow their exports.”

The easy of doing business is still not that easy. Contends Jain: “After digitalisation of many things, it is now easier to do business, but there are still so many reforms those need to be organised to enable an entrepreneur to do business easily and focus more on productivity.”

What Can Destination India Even Mean?

All other (mostly smaller) apparel manufacturing countries have some advantage or the other over India as far as market access (tariffs, among others) is concerned. So, how can India break through from this rut, and market itself as the sourcing destination of choice? Though it had its flaws, Sri Lanka's ‘Garments Without Guilt’ tag had worked heavily in its favour, hadn’t it?

This begs the question: does the Indian apparel export sector need a tag? Say, a brand name?

Dhingra doesn’t think so. “I think we should follow the path we are on. Sri Lanka lost the ‘guilt-free’ plot, and their economy went bust. Excess of everything is bad; even excess of good. We should let our ‘organic’ growth happen organically. We have a very large population to feed. We had no choice but to go GM (i.e. Bt cotton). The good always comes with the bad. We have to learn to maintain a balance for the larger good of society.”

Jain, on the other hand, has been working with all type of overseas customers—be it a premium brand or a discount store. He, therefore, has a different take on the subject: “The root cause of the lack of market access is the price factor. In India inflation is killing input costs and making exports expensive as compared to smaller apparel manufacturing countries. Take for example, Bangladesh. They have such a low cost of production as compared to India. To start with, land and building costs are lower and FAR (floor area ratio) coverage in a building is higher than in India, making them get more space in the same building to expand business. Labour is cheaper, and electricity and gas too are much cheaper there. Thus, if the input costs are contained, we have much higher capacities and abilities than the smaller countries to capitalise the situation.”

Nagan, however, has a range of suggestions. He summarises them thus:

The Indian government should hire and deploy some of the best advertising consultancy companies to communicate the story of the Indian RMG industry as being super-compliant and super-quality. The quality of the educated staff and workers in our factories ensures that our finished products are also of high quality and durability. This should be captured under Brand India.
They should also mention in their advertising over print and social media that the Indian textiles–RMG industry has a very effective safety record and has helped lift hundreds of thousands of workers to a well-off economic status.
The specialities of every province of India must be patented and captured in our trade handbooks for marketing purpose. For example, Ikat, Bandhani, Kashida embroidery, Pasapali/Kotpad cotton weaves and others. The marketing must be done zone by zone offering every season a new collection. Project: ‘Take Indian Villages to the World’.

Nagan leaves it there. But one would hope that the experts furiously drafting the next Foreign Trade Policy of India would take cognisance of the suggestions.