The Indian textile industry is going through a tough phase following the slowdown in US and due to cheap textile imports from neighbouring countries like China, Bangladesh and Sri Lanka. The removal of import restrictions on 342 textile items announced in the recent exim policy is also considered as a possible threat to the domestic textile industry.

Even as the textile industry is calculating the amount of damage due to the flooding of Chinese goods as well as the economic slowdown in the US, Union Finance Minister Yashwant Sinha has imposed a 16 per cent excise duty on unbranded garments also. Sinha’s decision to impose excise duty comes at a time when the branded garment manufacturers lobbied for over two months for the removal of the 16 per cent excise on them.

indiamarkets spoke to Satish Mahajan, Chairman, Clothing Manufacturers Association of India (southern region) and Managing Director of Garments International Pvt Ltd, Bangalore, to know about the challenges facing the Indian textiles and garment industry.

indiamarkets: What is the fallout of the end of the quota regime on India?

Mahajan:  Once the quotas are phased out completely in 2005, India will find it difficult to even survive in the international market. Only those manufacturers with a proven track record will be able to come out of it. After that stage, India won't see any new manufacturing firms coming up and textile export earnings will drastically come down from the present 33,000 crore per annum.

indiamarkets: What is the current status of the Indian textile industry?

Mahajan: Exports of Indian textiles have already come down. We are facing a severe invasion of cheap Chinese goods into India. Invasion of not only the domestic market, but also the markets overseas. India accounts for a sizable exports of apparel to the US textile market, but now even that has been invaded by China, Bangladesh and Sri Lanka with their products, which are at least 20 to 30 per cent cheaper. On the other hand, we are not able to produce at a cheaper price because of the high cost of raw material and power supply. However, the full effect of the Exim policy announced on April 1, can be seen only in the second half of the year

indiamarkets: What are the prospects then for the Indian apparel industry?

Mahajan: The Indian apparel industry will face severe competition in the lower segment.  The raw material cost is so high that Indian manufacturers cannot compete with the cheap imports from neigbouring countries. People would buy the cheap imported garments and the Indian garments will just perish in the retail shops.

indiamarkets: At a time when the textile industry is passing through a tough phase, the finance minister has imposed an excise duty of 16 per cent on unbranded garments as well. What would be the effect of this move?

Mahajan: No more new industries will come up in India and the sick textile industries will eventually closedown. The main reason why so many small-scale textile industries came up after 1970 is because excise was abolished on garments encouraging apparel textile manufacturers. And now, the excise has been imposed making the survival of these industries difficult. It would be better for a person to set up apparel textile firms in neighbouring countries where the cost of production is less. It's high time that the government took some immediate steps to save the domestic industry. Of course, some hard decisions had to be taken. But the industry's survival will get harder now.