Previous

Page - 17

4. Textile Sector

China is one of the major beneficiaries of the dismantling of the quota regime and would undoubtedly lead this inevitable change. Performance of India would largely be a factor of Chinese aggression.

Clothing is one of the basic needs of mankind. World average per capita consumption of fabric is around 8 kg per annum. China's share in these apparel categories increased from barely 9 per cent to 45 per cent within 15 months. China is expected to increase its share up to 65-70 per cent. Indian textiles are well-diversified as exports accounts for 36 per cent and domestic consumption for 64 per cent. The biased government policies in favor of small scale sector have constantly discouraged large investments and accordingly growth prospects of the industry have also got restricted. This has also made it prone to import competition.

Price Pressures: It is expected that fall in prices would be compensated by reduction in costs, but in reality, things could be different. Global players are already asking for steep reduction. Currently, China is the most restricted region in the world and India's quota limits are in certain cases 8-10 times that of China's. Hence, abolition of quotas and thus quota rent would be more beneficial to China than India or any other country for that matter. China has been routing its T&C exports through third-world countries as well, which is a rare case for India. Given the scenario, we believe that here also China would gain far more than India. Hence, the fall in product prices would have a negative impact on bottom-line of Indian companies.

Next

* Contributed by -
Syam Krishna V. K. ,
B.Tech. (Prod. Engg.), Kerala University,
MBA 2007, DOMS, IIT Madras.