Leveraging Apparel and Textile Exports for Higher Economic Growth and Employment Creations

1. Leveraging Apparel and Textile Exports for Higher Economic Growth and Employment Creations Dr. Harish Anand Place: CII , Delhi 22nd July 2019

2. Asian economies experiences show that textile and apparel industry grew in the initial stage of economic growth and set stage for diversified industrialization and rise in per capita income level in subsequent years. Industrialization started with labourintensive industries like RMG manufacturing in Asia Bangladesh Vietnam 2005-2019 China 1985-2005.. …2019 S.Korea, Hong Kong 1970-1985 Japan 1940-1960 Step-by Step specialization starting with labour intensive industrialization- Flying Gee Model of Asian tiger economies’growth 3 Time line

3. South Korea - Per capita income and apparel export growth trends and relationship Attracted by low per capita income (leading to lower labour cost) in initial years of industrialization, South Korea apparel exports risen till 1995. Thereafter, rising per capita income led to shift of apparel manufacturing out of South Korea . In this process, it made a strong base for rise in per capita income to higher levels in South Korea in years to come. 4

4. Hong Kong - Per capita Income and apparel export trends confirm existence of mutual correlation Along with South Korea, Hong Kong benefitted from shifting of apparel manufacturing out of Japan from 1970 onwards. Hong Kong witnessed sharp increase in apparel exports for a longer period of time till per capita income rose to very high level. Longer stay than Korea can be partially attributed to liberal export quota under WTO Agreement of Textiles and Clothing(ATC) 1995-2005. 5

5. China – Significant lower per capita income than NIE countries( Korea and Hong Kong) made China hub of apparel manufacturing for global markets till even more lower per capita income countries emerged on horizon The play of lower wage linked with lower per capita income than Hong Kong and South Korea led to shift of apparel manufacturing to China. In post ATC regime where competitiveness alone determine export performance, China apparel exports grew unabated. Rise in per capita income to above USD 8500 and entry of low per capita income countries like Bangladesh and Vietnam in apparel exports slow down China apparel export’s growth 6

6. Rising apparel exports of Bangladesh and Vietnam confirms apparel manufacturing important role in rising income level of a country at initial stage of economic growth Lower per capita income which is under $2500 against China’s per capita income above USD 8500 presently, led partial relocation of apparel manufacturing out of China. Bangladesh and Vietnam’s apparel exports saw steep rise during 2005-2017. This period also witnessed rapid increase in per capita income by three to five folds in these countries with generation of millions of jobs. 7

7. India:Withpresent per capita income level of about USD 2000, there is scope to grow for next about 20 years till India per capita income reach at USD 8500-9000. 8

8. Asia: Textile manufacturing has been following apparel manufacturing and relocating in tandem… After Japan, South Korea and Hong Kong, both have seen growth of textile industry along with apparel manufacturing and exports though with some time lag. Similarly, textile manufacturing also followed apparel manufacturing out of these countries with rise in per capita income level 10

9. … however the relationship is not unconditional and rest on recipient country preparedness in terms of suitable policy support Fierce competition from lower per capita income economies like Bangladesh and Vietnam has taken away large chunk of increase in world apparel exports from China. Despite of that, integrated approach for growth of textile and apparel helped China to maintained its leadership in world textile and apparel exports 11

10. Vietnam : After capturing 6% share in world apparel exports, Vietnam become largest supplier of cotton yarn to China by replacing India indicating growing integration of textile value chain 13

11. India textile industry : At a glance • Industry is presently about USD120 bn growing at about 6-7% CAGR • Exports USD 38 bn divided almost equally between textile and apparels • Presence in complete textile value chain and largest industrial employer in the country • Wide range of Cotton / Spun yarn- Second largest spinning capacity in the world after China • Largest exporter of cotton yarns • Strong base for Cotton and man made fibers • Wide range of Cotton and Synthetic fabric • Growing demand for Technical Textiles / Performance Fibres

12. High global integration offset disadvantage of absence of integrated textile industry for global competitiveness

13. Benefitting from present global trade regime for textile and apparel trade • Likely gains • Job creations for people with minimum skilled/unskilled especially females • Foreign exchange earning • Socio-economic transformation of the society especially lower strata of society • How to go about it-policy prescription • Chip in global textile value chain where entry is easy with minimum investment and minimum time- APPAREL MANUFACTRUING • Liberal trade policy for sourcing of raw materials of all kind • Leverage LDC benefits for zero duty access to EU and others • Invite global RMG manufacturers

14. Thanks