Written By Dheeraj Tagra

At a time when India is seeing a growing number of young entrepreneurs eager to innovate and take risk in the shape of ‘start-ups’, it is sad to note that the apparel manufacturing sector has not attracted these youngsters. If we do see some intervention in the textile value chain, it is mostly on the retail side and little bit on the tech side. Over the years, there are very few professionals who have taken the plunge to be entrepreneurs and run a factory successfully.

While entrepreneurship is being encouraged greatly these days, the definition of MSME is enhanced and many Government schemes are inviting investments in apparel manufacturing, why has the apparel industry been left behind in getting new ‘entrepreneurs’ is a question many are asking. The fact remains that the Indian apparel professionals lack entrepreneurial skills and feel safe working with established companies rather than using their experience to upgrade the industry.

It is also pertinent to mention here that the second generation of established players are not much enthusiastic to continue in the apparel or textile manufacturing sector; so having a fresh entrepreneur, for whom understanding the functions of the industry is difficult, is indeed a cause of worry for many.

At a time when India is seeing a growing number of young entrepreneurs eager to innovate and take risk in the shape of ‘start-ups’, it is sad to note that the apparel manufacturing sector has not attracted these youngsters. If we do see some intervention in the textile value chain, it is mostly on the retail side and little bit on the tech side. Over the years, there are very few professionals who have taken the plunge to be entrepreneurs and run a factory successfully.

Often, Indian apparel factories claim that a particular department/unit of their company is a separate profit centre for them and their teams runs its business as entrepreneurs, rather than just doing their stated job, but is that enough? What more can be done to encourage fresh entrepreneurs to be a part of the apparel industry, needs serious debate.

Many at small scale but none at the large level To its credit, the industry in the last few years has seen a few players that have started their own business and are surviving well. Majority of such entrepreneurs are those that have decades of experience in a particular department of an apparel unit, developed strong network as well as resources. And now they are utilising their strengths as a business promoter. In most cases these units are very small and operations are very much under the control of the promotor, so they are surviving, and a few of them have even grown reasonably well. There also there are few who are still struggling to create a place of their own.

Major obstructions

This is a hard fact, but the reality is that over the last 5 years, Indian apparel export is facing negative growth and it is very hard to grow for most of the established players. Very few companies have expanded in recent years while majority of the companies have seen standard growth. So, it’s natural that no one would like to invest in such an industry which does not promise growth on the base of past performance.

New players prefer to invest in other industries like retail, e-commerce as the variables are more manageable. One of the biggest constraints in apparel manufacturing or even in textile industry is managing a large labour base, besides being deadline driven and seasonal in nature (in export mainly).

Government push

It is heartening to note that the Government in the last few years has announced various initiatives to promote entrepreneurship across the manufacturing industry, that too at state as well as centre level like incubation centre, one district one product (ODOP), Mudra loan, Start-up India, Make in India, Single Window Clearance and various other kinds of subsidies.

The overall industry can expect to see more inflow of investment with initiatives likes proposal for creation of National Technical Textiles Mission for a period of 4 years (2020-21 to 2023-24) with an outlay of Rs. 1,480 crore and approval to introduce the Production-Linked Incentives (PLI) Scheme with the financial outlay of Rs. 10,683 crore for over a 5-year period.

Yet, experts believe that Government is not much concerned regarding new entrepreneurs in the apparel business as fresh investment by old players also serves the purpose of the Government – large-scale employment generation. According to information shared by Apparel Export Promotion Council (AEPC), there are 493 members who have established their companies from 2017 to date, but how many of them are actually new entrepreneurs, even AEPC is not sure about this.

Giving the obvious reasons for lack of fresh talent in the industry, Rahul Mehta, Chief Mentor, CMAI and MD, Creative Garments, Mumbai, argues, “The simple reason is the meagre profitability of the apparel sector. Garment manufacturing is a labour-intensive activity, involving largely hands-on working and day-to-day operations. Although the investment tends to be lower than most other industries, the returns do not justify the effort. Hence, whilst existing companies continue to operate, very little incentive is there for new entrepreneurs coming in.” He further adds that apparel industry is considered a traditional industry, and does not have the appeal of a ‘New Age’ industry – which most people of the younger generation would be interested in.

Regarding Government schemes, he is of the view that most of the Government schemes are for refund of taxes, and not really for making the business more profitable. Hence, these would not incentivise fresh investments and that too from new entrants.

What could be the solution!

To bring fresh approach to a stagnant industry, new entrepreneurs are a must and to encourage this, Government schemes have to be devised accordingly. At the same time, proper guidance and hand holding by existing players is also required rather than looking at these new players as just a competition.

Akhilesh Anand, MD, Carnation Creations, Coimbatore who is among the successful entrepreneurs to have grown in last few years, is of the view that first of all, any professional planning to start their own business should have clarity regarding what they wish to do and why. After this they should build partnership with like-minded people so that both the sides have a common vision and their team should also align with the same vision. He further adds that along with positive aspects, budding entrepreneurs have to think and plan for negative aspects also. “Whatever age a professional has, his/her thought process should be young, should have a knack for rapidly accepting the changes and be innovative at all levels,” he reasons.

A proper ecosystem having equal focus on export as well as domestic market should also exist to promote new players in this industry. With the recent labour reforms and strong focus on skill development, one can expect that managing labour, one of the most difficult aspects of the apparel manufacturing industry, will be easy in coming years. And it will help to attract entrepreneurs in the trade.

Dr. Biswajit Acharjya, Assistant Professor, Entrepreneurship Development Institute of India (Ahmedabad) agrees that Indian apparel manufacturing industry has been missing new entrepreneurs in the last couple of years in India. “The need is to strengthen and properly execute the labour law on a national level. Major textile and apparel units run on electricity which costs more compared to other mediums, especially CNG gas. At the same time, India is having limited water facilities in specific areas. We need to create sufficient water preservation through rainwater or recycling seawater. Infrastructure also needs to improve,” he says. He further adds that there is always a mismatch between the State and Central Government policies in India, which is again a concern. “Existing entrepreneurs should play an active role in mentorship for the new, like job training, grooming and assurance for future responsibility,” he argues.

Apart from Entrepreneurship Development Institute of India (EDII), there are other institutes in the country also dedicated to entrepreneurship like Institute of Entrepreneurship Development (IED), The National Institute for Entrepreneurship and Small Business Development (NIESBUD).There is a strong need to push for entrepreneurship, with a focus on the apparel sector.

Devangshu Dutta, CEO, Third Eyesight, a leading consultancy company, is of the view that the textile value chain has not really been seen as a strategic area by the Indian Government for many years, regardless of the political composition of the Government at the centre.

“Textile and apparel exports have grown at a compounded rate of around 7 per cent annually, a rate almost half of overall exports, when some other major sectors have grown 12-15 per cent, or even as high as 22 per cent annualised in the case of the automotive sector which was virtually non-existent in the export basket 20 years ago,” he says and further adds that India has some critical disadvantages against other competing nations – it is logistically distant from most developed markets, and it is not part of any trade bloc that would give it duty-free access.

To fight against these disadvantages, its natural advantages of entrepreneurship, design and product-development capability and vertical value chain need a lot of support. The Government must also stop seeing the sector in terms of its individual components (fibre, yarns, fabrics, apparel), and must see it as a chain in which we should be focused on the end-point (finished products) to maximise the value captured by India.

“There is no dearth of entrepreneurs in India, and the apparel business has relatively low barriers to entry. If the overall operating environment is cleaned up and made less cumbersome, our firms will do much better. A strategic push is also needed to be funded by the Government for technological upgradation of Indian apparel businesses, not only in terms of manufacturing but also in terms of the improvement of business processes, human capital and digitisation – it will not be expensive in the larger scheme of things but will go a long way in making Indian entrepreneurs and their teams better equipped to deal with the rapidly changing business environment,” he says.

Closing the debate on a thoughtful note, Deepak Mohindra, Editor-in-chief, Apparel Resources opines, “New ventures require professionals at its realm, those having the foresight to see and adapt to new consumer needs and changes and well-honed skills to take calculated risk. The existing stalwarts are largely not willing to take up this challenge, neither have they trained the generation next to take up these kinds of challenges. And that forms the basic handicap in building entrepreneurs and entrepreneurship. Building entrepreneurs requires not only a basic understanding of the industry but also support that has to come in from all quarters – Government, industry stalwarts and the banking system, which has to believe in them and back them as they have backed them in IT sector.”

Source: apparelresources

India’s traditional skills in textiles, intricate craftsmanship, and creativity in producing a range of design-intensive products have enticed buyers from all over the world. India retains a strong and sustainable position among the top five exporters of textiles and clothing in the world.

India’s textile exports are currently weighted in favour of raw materials and intermediate products leading to ‘value-leakage’, which is a major concern from the long-term competitiveness perspective.

Within India, Delhi holds a position of prominence and can play a significant role in capturing additional value within the country. As a sourcing destination and as a gateway to the rest of India’s textile and apparel sector, Delhi provides unique value in product development and design, and a tremendously flexible supply base.

This capability is especially critical in an unpredictable market where retailers and brands are looking to source ever-smaller quantities of product, increasingly closer to the season.

According to the Director (Merchandising) of one of the largest US retailers sourcing from India, “Delhi scores high on responsiveness, and is more enterprising. It has the capability to handle extraordinary fabrics and is strong in interpretations of artwork.”

The apparel cluster in Delhi-National Capital Region (Delhi NCR) includes locations across four states, and accounts for about twenty five percent share in the country’s current apparel exports. If Delhi’s apparel cluster were to be treated as a country, at US$ 2.6 billion (Rs. 12,000 crores) of apparel exports, it would fall within the Top-20 list, ahead of countries such as El Salvador, South Korea, Philippines, Peru and Egypt. Moreover, being a labour intensive industry, apparel cluster offers immense employment opportunities in NCR, already with current direct employment of over 1 million as per Third Eyesight’s estimate.

A study carried out by Third Eyesight has identified an additional growth opportunity of over US$ 5.5 billion (Rs. 25,000 crores) both in its current markets and products, as well as new product opportunities.

For many buyers, sourcing from Delhi NCR cluster is still restricted to beaded, sequined, and tie-dyed blouses, dresses and skirts. While Delhi remains strong in these products, it now also sells funky denim and jersey wear to young fashion brands, men’s tailored suits to American brands, and women’s undergarments to Europe.

Delhi now offers a base both to international buyers looking at buying finished products, and to Asian, European and American manufacturers looking at setting up alternative manufacturing locations that can tap international as well as the Indian market.

Going forward, the key stakeholders of the Delhi NCR apparel export cluster – individual companies, industry associations and the government need to urgently undertake adequate action steps as the competition is gearing up and the perceived strength of Delhi NCR cluster at the moment may not remain a USP of this cluster in the future.

The Delhi NCR apparel export cluster strategy report along with action steps and key implementation areas was presented at an industry seminar ‘Discovering Growth’ in New Delhi. The seminar was hosted by GTZ in partnership with Small Industries Development Bank of India (SIDBI) and Apparel Export Promotion Council (AEPC). The seminar was attended by the key stakeholders of the Delhi NCR apparel cluster including leading apparel exporters, buying agencies and retailers.

The Textile and apparel industry is of particular importance to India. It not only provides employment to a broad base of semi-skilled and unskilled labour but also helps to extend the economic bounty to urban and semi urban areas. Though India has a history of thousands of years in global trading of textile, it contributes only 3% to the global exports of textile and clothing.

While the urge to grow exists, there is a huge difference between the current exports of about Rs. 864 billion (US$ 20 billion) and the target of Rs. 2,500 billion (US$ 55 billion) by 2012. To achieve this vision, exports must grow at around 25-35 per cent a year for the next 4 years, depending on how weak or stable the current year is. This growth rate seems difficult considering the fact India has actually grown its exports of textiles and apparel at an annualized growth of a little over 14 per cent from 2003-04 to 2007-08.

Even if the industry looks at increasing the volume of exports to achieve the vision, the ports do not have the handling capacity considering that they currently operate at 91 to 92 % of available capacity.

Hence, incremental thinking will not help to achieve the vision.

Our key concern is the value “lost” by the industry. Being the low cost supplier does not necessarily translate into greater market share. The Indian Industry must look at enhancing the value delivered rather than competing on the cost platform. Indeed, India compares poorly to other countries on the value captured per employee.  (For instance, if the export value captured per employee in India was as much as Turkey, India’s exports would be close to China’s exports of US$ 161 billion.)

One major concern that needs to be addressed is that India’s exports are still weighted in favour of raw materials and intermediate products, rather than finished products. Apparel exports account for only 41% of India’s textile exports in 2007-08. India’s product mix also needs to be aligned to global market needs, rather than only focussing on “traditional strengths” – this includes enhancing the share of non-cotton products in the basket.

Another area that is neglected is the inherent competitive capability of developing new products. The industry needs to develop and nurture these skill sets to create a sustained competitive advantage in the global scenario. India already provides buyers with value in terms of product development and design, which needs focus and further strengthening.

Further, India’s domestic industry, and its skill at understanding market needs, creating and merchandising product, can also play a valuable role in the industry’s growth.

The competitive advantage offered by being able to influence the development of a product is immense. And given that sourcing lead times are shorter in unpredictable times, a supply base that has been involved with the buyer right from the development stage of the product is most likely to get the final order. Third Eyesight proposes a four dimensional model: Define, Design, Develop and Deliver so as to achieve the industry-wide development, of projecting India as a valuable supplier, and sustaining its value needs.

By creating an ecosystem focused on design and product development, India can create and capture the billions of dollars worth of value that is being lost to other countries.

This is an extract from Third Eyesight’s report presented at the FICCI 3rd Annual Textile And Garment conference in Mumbai. The report was released by the Minister of Textiles, Government of India. To download the full report prepared by Third Eyesight, please click here.

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