Get These Wrinkles Out of the South Asian Textile Story

With the onset of the third wave of global production, South Asia became a major player in the global textile and clothing market. Bangladesh joined the league in the 1980s due to the outbreak of civil war in Sri Lanka. Ancillary industrial policy was a key factor in the 1990s, with zero duties on raw materials and capital machinery, as access to global markets gave the industry a boom. Bangladesh overtook India in exports over the past decade as Indian labor costs resulted in products becoming 20% ​​more expensive.

position of countries

Low production costs and free trade agreements with Western buyers favor Bangladesh, which ranks third as a global exporter. The progress of India and Pakistan in readymade garments has been recent as compared to their established presence in textiles. India accounts for 4% of the US$840 billion global textile and apparel market, and ranks fifth. After declining 0.8% in 2019, India’s exports saw a significant volume of trade later. Pakistan saw an increase of 24.73% in textile exports (2021–22), amounting to US$10.933 billion.

India has been successful in developing backward links in the cotton and technical textiles industry with the help of Technology Upgradation Fund Scheme (TUFS). However, India is yet to move to man-made fibers as factories still operate in a seasonal manner. Pakistan is very focused on cotton products; It lags because of issues of skill and policy implementation. Bangladesh has been ahead of time in adopting technology. Bangladesh also focuses on cotton products specializing in the low value and mid market price segment. The country faces the challenge of high workforce and skills resulting in high costs. Sri Lanka made the most progress in climbing the value chain. Advances in training, quality control, product development and trade are attracting international brands to Sri Lanka.

In leap forward, obstacles

The Fourth Industrial Revolution (4IR) is focusing on integrating technology into the entire production life cycle from production machinery. The production cycle includes all digital information and automation including robotics, artificial intelligence (AI), virtual reality, 3D printing, etc. Robotic automation exemplifies production efficiency especially in areas such as cutting and color accuracy. In the coming days, extensive restructuring in adaptation of systems to human and market needs can be expected. With change come opportunities as well as challenges. The Asian Development Bank anticipates challenges of job loss and disruption, inequality and political instability, concentration of market power by global giants and greater vulnerability to cyber attacks.

India’s production centers are operating at almost full capacity, with companies looking to expand business and production capacity. With an unemployment rate of 7%, India is facing the challenge of job creation in the wake of increased automation. The World Bank expects the trend to accelerate in the post-COVID-19 market. 4IR can result in unemployment or poor job creation, which mainly affects the low-skilled workforce. The integration of skill and technological investments will play a vital role in phasing out obsolete jobs and adoption of new jobs. It is imperative to ensure a living wage and ease of access to education. The market shifted from ‘seasonal fashion’ to ‘fast fashion’ and later to ‘precision fashion’, thereby reducing the lead time. Digitization and automation in areas such as design, prototyping and production are critical to stay abreast, and to control production quality and on-time delivery. Quick transportation becomes important in cost control as reshoring and near-shoring gain currency. While the transition may be easier for large factories, medium and small scale entities may suffer. The adoption of new technology and automation is also closely linked to product basket diversity manufacturing.

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Sustainability is also an important consideration for overseas buyers. Bangladesh’s readymade garments pioneered ‘green manufacturing’ practices to help conserve energy, water and resources. Textile and apparel waste account for 17%-20% of all water pollution. Many Indian players are focusing on input management over tailpipe management. Sustainable practices such as regenerative organic farming (which focuses on soil health, animal welfare and social equity), sustainable manufacturing energy (renewable sources of energy are used) and circular are being adopted. The Government of India is also committed to promoting sustainability through Project Sustainable Resolution.

Tax exemptions or reductions in imported technology, access to financial incentives, maintaining political stability and establishing good trade relations are some of the basic forms of support from governments to industries.

labor lead

Access to affordable labor remains an advantage for the sector. Furthermore, a country like India can lead to a large number of scientists and engineers, as is evident in the areas of drones, AI and blockchain. India’s potential lies in its resources, infrastructure, technology, demographic dividend and policy framework. The creation of a center for the Fourth Industrial Revolution is indicative of India’s intention. The US trade war on China, due to human rights violations as well as economic constraints, opens doors for India and Pakistan as they have strong production bases. Like China, India has a large supply of raw materials to fabrics. Bangladesh has also emerged as a top exporter in the cost competitive global market.

Bangladesh’s investment in technology over the past decades is an added advantage. Having acquired significant knowledge and advanced technologies in the last 30 years, it is in prime position. Bangladesh envisions the year 2041 for technological advancement, especially in ICT. Pakistan imported machinery (+77.5%) worth US$ 504 million by the first half of 2019-2020. India’s proposed investment of US$ 1.4 billion and setting up of an all-in-one textile park is expected to increase employment and ease of doing business. India extended the tax exemption in apparel exports till 2024 with twin goals of competitiveness and policy stability. Reforms in labor laws, additional incentives, exemption from income tax, duty cut for man-made fiber, etc. are other notable steps.

a map out

Dependence on cotton product and focus only on major export destinations may reduce the market scope for South Asia. The focus should be on diversification with respect to technology, product basket and customer base. Adaptability is also important in meeting the demands of man-made fabrics, other complex products and services. New approaches in the areas of compliance, transparency, occupational safety, sustainable production etc. are inevitable changes in store for South Asia to sustain and grow the business. Reskilling and upskilling of the labor force should also be a priority for this sector to remain at the top of the market. Finally, there is a need for the active support of governments in infrastructure, capital, liquidity and incentives.

Syed Munir Khasroo is the President of the international think tank, The Institute for Policy, Advocacy and Governance (IPAG), New Delhi, India, with a presence in Dhaka, Melbourne, Vienna and Dubai. E-mail: munir.khasru@ipag.org