NEW DELHI -- India's government has approved a 60 billion-rupee ($894 million) package aimed at creating millions of jobs in the country's textile and garment industry.
The package is also meant to boost exports from the garment sector, which lag behind those of Bangladesh and Vietnam.
India was ahead of the two countries in garment exports from 1995 to 2000. Neighboring Bangladesh, now the world's second largest apparel exporter, after China, surpassed India in 2003. Vietnam did so in 2011, despite India's established value chain from fiber to apparel manufacturing.
"Bangladesh, as a least-developed country, gets preferential access in terms of duties to both to the EU and the U.S.," said Arvind Singhal, chairman of Technopak, a consultancy that focuses on fashion retailing and other sectors. "For Vietnam, it is the same in the case of the U.S., which is the largest clothing importing market [along with] the EU. So, there's certainly an advantage in favor of Bangladesh and Vietnam."
For India, a country of 1.25 billion, however, "it is the domestic market which is much bigger than the export market," Singhal said. "So India does not have to worry only about exports. The garment industry will do well in India [due to rising] domestic demand as its economy grows."
The government package for the textile industry is aimed at creating 10 million jobs, 70% of which are to go to women, in the next three years. It includes a slew of labor-friendly measures to promote job creation, economies of scale and exports.
The government expects the steps to lead to a cumulative increase of $30 billion in exports and to $11 billion worth of investment over the next three years.
"India has the potential to be the global leader in the apparel sector," Finance Minister Arun Jaitley told a media briefing last month.
India's textiles industry contributes about 14% to industrial production, 5% to GDP and 11% to the country's export earnings. It employs over 40 million people directly and 60 million indirectly. The $108 billion industry is expected to reach $223 billion by 2021.
Rashmi Verma, the secretary in the Ministry of Textiles, said the garment sector has huge potential.
"We have the entire value chain in India, from fiber to apparel manufacturing," she said. "In Bangladesh, they don't have cotton fiber, which they have to import. But we have fiber, yarn, fabric, and we also do processing and garment manufacturing, which is a very big advantage."
In China, she noted, wages have now increased, and the focus shifted from textiles to technology. "So their global market share [of 40%] is coming down and a vacuum is being created which can be beneficial for us," Verma added.
"If the latest government package for the textiles sector is implemented properly," Verma said, "we will be able to overtake Vietnam and Bangladesh in the next three years in garment exports."
Bangladesh concerned?
Analysts and those in the industry, meanwhile, feel international buyers are unlikely to leave Bangladesh despite the recent terrorist attack in a popular Dhaka cafe that targeted foreigners. Twenty-two people were killed, including nine Italians, many of whom worked in the garment sector. Seven Japanese, an American and an Indian national also lost their lives.
The attack, on July 1, shook Bangladesh's $26 billion apparel industry, which contributes 80% to the country's exports and employs 4 million people.
The Islamic State group claimed responsibility.
Now there are fears in Bangladesh that major apparel chains like Sweden's H&M Hennes & Mauritz, Japan's Uniqlo, America's Gap and Britain's Marks and Spencer may rethink sourcing from the country.
The strike followed a spate of targeted killings of religious minorities, secular bloggers and liberal activists. The Islamic State group and al-Qaida also claimed responsibility for these attacks. Bangladesh's government, however, says homegrown terrorists are behind them.
On whether H&M is reconsidering its Bangladesh sourcing, Hacan Andersson, a company spokesman, said in an email that the South Asian country "is an important sourcing market for us."
Andersson did not elaborate on H&M's business strategies in Bangladesh or India.
Mohammed Hassan Imam, director of Bangladesh's DBL Group, an apparel maker and exporter whose clients include H&M, Puma, Esprit, Wal-Mart and Marks and Spencer, feels the recent terror attack -- the first such strike in the country to target foreigners in a major way -- is a big concern.
"At the same time, [terrorism] is a global issue," he said when asked whether Bangladesh's prevailing security situation will affect the country's garment sector, largely dependent on foreign investment.
"In our organization also, foreigners from countries such as the Philippines and Thailand are working, and we are ensuring their security," Imam said. "Definitely people are worried about the security situation in Bangladesh, but I don't think it is going to hit the industry."
Technopak's Singhal also feels Bangladesh's garment industry is unlikely to come under pressure. "When you look into sourcing, money matters the most," he said. "As long as Bangladesh remains the cheapest country in the world to source, buyers will stick to it."
He noted that similar concerns were raised after the collapse of the Rana Plaza complex, just outside of Dhaka, in April 2013. The worst garment industry disaster in Bangladesh's history claimed more than 1,100 lives and triggered calls for reforms of a sector known for grim factory and living complexes as well as low pay, about $70 a month.
Kazi Rashed, the chief executive at Golden Moon (Bangladesh), an Italian leather footwear company, said the recent attack has not affected business.
"We mainly procure leather from Bangladesh," he said, "and sometimes from India and China, also."
