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Last Updated: Wednesday, 22 December, 2004, 14:58 GMT
India awaits textiles boom

By Geeta Pandey
BBC News, Delhi

Delhi clothing factory
Matrix Clothing is looking forward to the "huge change"
Textile industrialists in India could not be more optimistic as 31 December approaches.

That's the date when the 30-year-old international Multi-Fibre Agreement (MFA) expires.

The agreement has regulated the multi-billion dollar annual world trade in garments through export quotas.

The buoyancy in India is in marked contrast to the fear over the demise of the MFA in some other parts of Asia.

Expansion

According to a study conducted by the World Trade Organization, India is expected to increase its share of the global textile business from 3% to 15% by 2010.

One garment exporter in Delhi has likened the end of the quota system to the "big bang of the textile universe".

Gautam Nair is the owner of Matrix Clothing in Delhi's suburb, Gurgaon. His company makes golf shirts for big-name clients like Greg Norman and Ashworth in the US.

Gautam Nair (R)
Gautam Nair (R) says this is a huge opportunity for Indian firms

Matrix employs 2,200 people and the workers produce 7,000 shirts and thousands of boxer shorts and beach wear items every day.

And with the quotas ending, Mr Nair is very upbeat.

"It's going to be a huge change for the whole world, for everyone connected with textiles," he says.

"It's been likened to the Big Bang because come 1 January, 2005, we get into a very different textile universe. I think it represents huge opportunities for India and for all the companies in India like ours. I think there's terrific scope for market expansion."

And at Matrix, expansion plans are well in place.

New floors are being added to the factory, more workers are being recruited and new machinery is being brought in.

The company's annual turnover is about $17m now; Mr Nair says he expects it to rise to $60m by 2010.

Not ready

The textile industry employs 35 million people and accounts for nearly one-quarter of India's exports.

Many say that since India has managed to meet all its quota demands so far, once they are removed, the exports will go up substantially.

We need to upgrade our port facilities, we need to upgrade our airports. China has had the foresight to look at these issues, but not India
Ratna Rao, buying agent

According to a study commissioned by the Indian Cotton Mills' Federation, by 2010 Indian textile exports are expected to rise to $40bn from the present $12bn.

DK Nair is the secretary general of the federation.

"There is extreme optimism in the industry and there are reasons to believe that this optimism can be converted to actual production and export.

"Textile shares have been moving substantially faster which is an indication that the investing public has the same level of optimism."

But many say India is not ready to handle the demands of a growing market.

Ratna Rao, a Delhi-based buying agent for the garment industry in the US, UK and Europe, is sceptical.

"A lot of it will be up in the air. The government hasn't done any clear planning. Have we increased our facilities to take extra cargo?" she asks.

"Currently there's always a backlog. We need to upgrade our port facilities, we need to upgrade our airports. This entire logistics position has not been looked into. China has had the foresight to look at these issues, but not India," says Ms Rao.

She says that unless India improves its infrastructure, international buyers will give Indian companies a miss.

The China factor

There are fears that in the post-quota world, textile markets will be swamped by Chinese products.

But DK Nair says he is confident that India will continue to grow.

"I don't think China is going to take away the whole trade. China is the largest exporter of garments today and they'll continue to grow, but there are several other countries which will grow.

"Most of the studies have put India as the runner-up, but there are many other countries which will also grow - like Pakistan, Egypt and Turkey."

Experts say so far the competition has been between countries, but in the post-quota scenario, the contest will be between companies.

A firm in India or China will have to compete with companies all over the world and only those that are efficient will survive.


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