INDIA: Slim margins for garment exporters following competition

NEW DELHI: China and smaller rivals like Bangladesh are going for the kill in the post-MFA era, seeking to maul the Indian tiger’s bottomline.

Fierce competition in the global market following the scrapping of export quotas has left Indian garment exporters facing bitter bargaining by buyers who are seeking up to 10% reduction in prices.

Combined with the recent reduction in duty drawback rates, such demands could dent the profitability of Indian exporters at a time when they are looking for a larger share of the global garment business pie.

While preliminary estimates indicate that India’s garments exports grew only by around 11% during 2004, China has recorded an impressive growth of 18.7% to touch $61 billion.

As compared to the China, India stands like a pygmy with exports of just $6 billion during 2004. In other words, China has managed a much faster growth in exports despite a much larger base which is nearly 10 times that of India.

“There is plenty of business. Bulk orders can be booked in the global market but competition has increased manifold. Pricing and costing are a problem,” said Mr Shekhar Agarwal, vice-chairman of the LNJ Bhilwara Group and managing director of Maral Overseas, an export-oriented unit (EOU).

“It will be survival of the fittest. We feel that there is tremendous scope of boosting exports of not only garments but also yarns and fabrics,” he added.

Exporters want to exercise caution as China plans to expand its business much faster in 2005. The Dragon is moving rapidly towards its attempt to capture 50% of the global market.