To avoid unionism in the industry, and yet cope with increasing opportunities, manufacturers were forced to set up new small-scale units with just 25-30 machines. Compare this with Bangladesh, for instance, where garment factories typically have 600 machines, says Mehta. Because of the limited size of their operations, Indian garment makers have never been in a position to invest in sophisticated, high technology to enable them to acquire large production volumes that are capable of generating economies of scale.

Says Mehta, "With changing fashion styles, a worker producing a particular style of a garment may have to change over to another style at short notice. Every time there is a change, new payment rates have to be negotiated, leading to potential labour-management conflict situations all the time."

This is particularly true since the industry is characterised by fluctuating demand forcing manufacturers to expand production during the busy spring-summer season and cut back during the winter and fall periods, when woollens and garments from manmade fibres (where India does not have a significant share) are in demand. In the absence of flexible labour hiring policies, which are not allowed by the law, these seasonal variations prevent manufacturers from ramping up output. As a result, the garments industry in north and west India has adopted the 'piece rate' payment structure as opposed to the wage rate structure in the south.

Labour reforms and size will go a long way in reassuring overseas buyers about the logistical soundness of suppliers who can function without disruptions. But with the dismantling of the quota regime, more and more buyers are likely to concentrate buying from fewer countries and the orders would primarily be directed towards large producers.

It will not be easy for Indian industry to find a solution to this problem. The conflicting demands of industry for a flexible hire-and-fire labour policy and the political compulsion to protect jobs will take time to resolve. What is the labour scene in China? In contrast Chinese manufacturers have steadier labour requirements, as they are able to satisfy demands for garments in both the 'spring-summer' and the 'fall-winter' season.