Testing times for Tiruppur knitwear industry

  •  India
  •  May 29, 2019
  •  By WFB Bureau
Testing times for Tiruppur knitwear industry

The hub for knitwear, Tiruppur, is an upmarket along with its nearby areas that comprise of a Rs.46, 000 crore annual apparel business and this 159 sq. km. city observes some activity related to knitwear production. But, since the last three years, things have not been in favour of the Tiruppur knitting hub.

Export growth has been unsatisfactory and investments too have been limited to needs. Moreover, price-competitiveness has posed a major hurdle to the sector.

The President of Tiruppur Exporters’ Association (TEA), Raja M. Shanmugham mentioned that they had targeted annual business of Rs. 1 lakh-crore by 2020, including domestic sales. Between 2012 and 2017, annual exports have seen increment from Rs. 10, 500 crore to Rs. 26, 000 crore. But for the past two or three years, this growth has been flat yet they hope to reach the target by 2022.

The recent announcement by the government about reimbursing all the embedded taxes in exports has given confidence and hopes to the association.  Before the implementation of GST, the incentives received by the industry through different schemes were nearly 13.2%, which was reduced to 5.7% after GST.

The garment exporters have thin margins and if the incentives were reduced by 3% to 4%, they can absorb the costs. But, liquidity gets affected in case of a drastic cut. Buyers in the supplier conferences, give priority to the countries having GSP (Generalised System of Preferences) benefits.

Indian prices are compared with those of Bangladesh by the buyers. The annual garment exports from Bangladesh near $37 billion while for Vietnam it comes to $27 billion. Export from Cambodia clocks $12 billion worth.

 In 2016-2017, clothing exports from India were $17.47 billion and in 2017-2018, it was $16.72 billion while in current fiscal till January, exports reached $12.8 billion as per the APEC data. With more competition, there has been a global race in the industry. Because of the GSP and the support from their respective governments, some countries have an advantage. Trends in buying are also undergoing change.

There are brands which have gone in for 16 seasons in a year and for each season, they have a signature design. Garments for each season, in such a scenario need to be supplied on time. These changes require adaptive behaviour from the exporting units.

Despite all odds, the inherent strengths of Tiruppur and its focus on efficiency and technology have helped it uphold exports for the last two years. The garment industry here needs Indian governments’ support considering the fact that countries like Bangladesh and Cambodia have the GSP advantage. Letter-head exporters have also declined considerably after GST, yet for the next financial year, the Apparel export Promotion Council (APEC) announces a positive outlook for exports.

This momentum however has been slowed down by recent decline in overseas demand. The situation can be controlled by focusing on three key areas – incentivising technology upgrades, expanding to new markets and product innovation.

Expansion of schemes for technology upgrades and introducing more policies to incentivise apparel exporters to upgrade technology, would help India perform better. New and emerging markets should be tapped by the exporters.

The knitwear industry in Tiruppur which is largely in the micro, small and medium enterprises (MSME) segment has Europe as its key market. So, in order to gain the confidence of buyers, quality and delivery play significant roles for exporters. Quality should therefore be ensured by managements even under price stress situation. All stakeholders in the knitwear town needs to adopt changes for better operation and management processes in order to leap to the next growth trail.

Image Source: www.livemint.com

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