India’s global textile exports are expected to fall down from targeted US $ 50 billion by 2010 to US$ 35 billion if the rising crude oil prices continue to upsurge over $ 80 a barrel as these will add to the already rising input costs to make its global export trade virtually uncompetitive, according a paper brought out by The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

As on today, our textile exports bring us foreign exchange of little over US$ 14 billion.

Releasing a Paper on `Rising Crude Oil Prices and Its Possible Impact on India’s Global Export Trade, ASSOCHAM President, Mr. Mahendra K. Sanghi said that the global crude prices are estimated to even go up over $ 80 a barrel to further propel the input cost for textile industry which is already high.

Also the transaction cost in case of textile exports which at present ranges over 10% will further go up with rising crude oil prices and put domestic textile trade into jeopardy, said Mr. Sanghi.

He pointed out that already the textile exports have witnessed a 20% decline in first 5 months of the current fiscal, the aftermath effect of which will be counter productive.

The domestic textile industry as such would require US$ 15 billion of new capital investment by 2010 to achieve the projected level of US$ 50 billion exports which now does not seem to be possible because the textile sector has not even received 1.5% of total FDI’s that India attracted in the last 10 years, felt Mr. Sanghi.

"In addition, not much of funds are being made available to accelerate our domestic textile exports. In such a scenario, the targeted exports of Indian textile will naturally fall to US$ 35 billion," said the ASSOCHAM Chief.

Bottlenecks and bureaucratic hassles continue to prevail for exporters at various Ports on account of very limited space availability which will continue because ports not being restructured and therefore continue to keep their capacity utilisation under heavy pressure to affect our export consignments, says the ASSOCHAM Paper.

Cumbersome procedures at customs go on and authorities most of the times do not take cognizance of the difficulties that the exporters face particularly in textile sector.

The ASSOCHAM Paper therefore suggests that if India wishes to achieve the projected potential, it will have to introduce reforms in the textile economy in order to attract FDI in this sector, which has spurred spectacular growth in China’s apparel-export industry.

The government should also eliminate restrictions that cause poor operational and organisation performance of manufacturers and discourage investment particularly FDI.

Flexibility in labour laws is urgently called for in the changed economic, commercial and fiscal regime. Amendments are also required to help free outsourcing to promote investment in labour-intensive and export-oriented garment sector.

Contract labour norms should be liberalised for textiles and garments so that units can hire labourers for a few months without the compulsion of having to absorb them permanently.

Infrastructure and power sector reforms should be undertaken at a high speed to facilitate the smooth functioning of the industry. India has high energy and capital costs, multiple taxation and low productivity, all of which add to production costs. As a result, textile and apparel products from India are less competitive than those of China and other developing countries in the international market.

Close attention need to be paid to the composition, volume and value of products as well as competitive strengths vis-à-vis countries like China, Sri Lanka, Bangladesh and Pakistan.

Despite India''s competitive advantage, a number of constraints continue to restrict the growth of Indian textile markets abroad such as more than 60% of the fabric production in the decentralised power loom sector, which is unable to compete with the cheaper and flawless fabric from state of the art plants of China or Taiwan.
 
The Associated Chambers of Commerce and Industry of India (ASSOCHAM)