Rising China apparel prices could be job boon for India

29 April 2016

India's apparel industry stands to gain at least 1.2 million jobs if apparel prices keep on increasing in China - currently the largest manufacturer of apparels globally as importers seek cheaper source markets.

A report released by the World Bank on Thursday showed India could benefit from the continuous rise of Chinese apparel prices, fuelled by rising wages and production costs in the world's second largest economy.

Estimating a 10 per cent rise in Chinese prices, the World Bank said India could see 1.2 million jobs being created. This it said would be as a result of global importers increasingly eyeing cheaper markets like India, Bangladesh and Vietnam.

China is expected to slowly transform into a consumption driven economy from being a global manufacturing powerhouse. Domestic consumption of goods, especially apparels, is expected to be partially fed by channelizing it from bulk exports.

While China has been the largest apparel exporter for the last 10 years, this is expected to change in coming years, the report said.

Apparel production, concentrated in the South Asian region, is a highly competitive business and the region accounts for 12 per cent of total global apparel exports.

However, countries like Bangladesh and Vietnam have stolen a march on India in recent years due to mass production, aggressive exports and low production costs. While India is gaining market share at a stable rate, it still lags behind other South and South East Asian nations, the report said.

However, it cautioned that the Trans Pacific Partnership (TPP) accord - a trade agreement between 12 Pacific Rim countries including the US - will also likely have a far-reaching impact on key sectors in South Asia, including apparel, pointing out that a reduction in tariff and non-tariff barriers could lead to trade diversion for South Asia, including in the textiles and apparel sector.

"Rising prices in China pose an opportunity to India in seizing a large share of business which will obviously shift elsewhere," said World Bank country director Onno Ruhl. India would have to boost trade through preferential agreements with major markets in order to secure this business, he added.

The report showed that a 1 per cent increase in Chinese apparel prices could improve EU demand for Indian products by 1.9 per cent and US demand by 1.46 per cent.

This international trend will also dramatically change the gender diversity of the apparel industry, which traditionally employs a larger number of women than men.

The report estimated that a one per cent increase in expected wages in the textiles and apparel sector in China would in turn raise the probability of women entering the labour force in other countries by 18.9 per cent.

However, to leverage India's strengths in apparel exports, the report stated that several policy actions were needed. This includes allowing easy access to manmade fibres, increasing efficiency and improving social and environmental compliance, it said.

The report also stressed particularly on increasing product diversity. India currently exports cotton based products, whereas global demands remain heavily in favour of manmade fibres, it said. Interestingly, China has secured higher exports by relying less on cotton, which accounts for lesser than 40 per cent market share of apparel exports.


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