Indias garment and textile industries have huge expectations from Modis government - but theyre unlikely to be realised

India's garment and textile industries have huge expectations from Modi's government - but they're unlikely to be realised

Will "strong man" politicians kick-start the sluggish garment industries in India and Pakistan? asks Mike Flanagan. Evidence so far, he suggests, shows progress ranges from positive to unconvincing.

On 28 May, Shahbaz Sharif, the chief minister of Pakistan's Punjab Province, laid the foundation stone for a reportedly $2bn, 1,700 acre, garment and textile production zone near Faisalabad, first conceived about six months earlier.

The same day, the country's National Assembly reported it would probably announce detailed plans in July for a similar-sized zone outside Pakistan's biggest port,  Karachi - a project it has been promising since 2003.

Three days earlier in Delhi, Narendra Modi was being sworn in as India's 15th Prime Minister. His landslide electoral victory was attributed to the sharp contrast between recent relative economic stagnation under Modi's predecessor and the economic progress in Gujarat State during his "business-friendly" period as its chief minister.

India's poor recent record in creating jobs parallels that of its garment industry being overtaken in world exports not just by China, but by Bangladesh and Vietnam too - both far smaller. 

Rich Country Apparel Imports

India's garment and textile industries have huge expectations from Modi.

The garment export industries in India and Pakistan share similarly poor performances since quotas were abolished at the end of 2004, and most observers' explanations focus on the sheer difficulty of getting anything done in either country.

What's the likelihood Modi and Sharif will change that? Evidence so far shows three quite different kinds of progress:

Core infrastructure: positive
One (allegedly) huge barrier to Pakistan's textile and garment industries - especially in the Punjab - has been energy availability. Not only has this obstructed production, but it has also brought out one of the industry's worst features: the tendency not to try solving a problem but to dump it on another victim.

Textile trade associations have been arguing for years that if there isn't enough generating capacity to power mills, someone else - farmers, say, or ordinary homes - should be cut off. Sharif, getting nowhere with trying for more power from the country's government, has successfully sought foreign investors in local energy networks.

Modi claims similar success in Gujarat with infrastructure like highways and public transport - and a number of chief minsters in other Indian states have also managed to sort out dreadful infrastructure themselves when the national government has got nowhere.

This typifies the contrast seen by many South Asian business people between the Modi's and Sharif's "hands on" management style and the apparent lethargy of national governments.

Textile capacity: uncertain
At first sight, something similar seems to be true of manufacturing capacity. Pakistan's central government has spent over ten years getting nowhere with a Textile City outside Karachi. In just a few months, Punjab's Sharif has found a Chinese investor for a huge complex in his province, driven through legislation fast-tracking its development, and started the building programme.

Apart from the Chinese investor's own company (Shandong Ruyi), no other textile company has yet announced they'll join the project. This one Pakistani garment/textile production zone compares with dozens of Indian Special Economic Zones (SEZs) already developed under the direction of its allegedly "lethargic" previous central government. In September 2013, India's Orient Craft, for example, claimed that tax changes during project construction meant less than a quarter of those SEZs are still in operation.

Building a production zone's better than not building one - but it takes a lot more than a "business friendly" government for viable factories to set up in them.

Modi's record so far: unconvincing
David Birnbaum recently criticised the Indian garment industry's international competitiveness - blaming the government's excessive support for its biggest spinners and weavers.

When Indians talk about the "textile" industry they can be referring to anything along the production cycle from cotton fields, through ginning, spinning, dyeing, weaving to what they call "garmenting." Each segment employs millions, and is convinced its interests are utterly unique.

Modi seems uninterested in garment makers' interests:

  • His reputation for being business-friendy was partly built on his "5F" ("Farm to Fibre to Fabric to Fashion to Foreign") mantra for the extended textile industry in Gujarat - but it was clear that the first three of those Fs really mattered: Farm, Fibre and Fabric. Part of the competitiveness problem of Indian garment makers worldwide is their excessive dependence on cotton: Modi's 5F programme was unapologetically aimed at increasing that dependency. 
  • The first line of the section on foreign trade in Modi's election manifesto specifically bans investments by foreign retailers like Tesco and Carrefour. There is no mention of action to pursue the free trade deals - such as with Europe - the previous government chased and India's garment makers want.
  • If India keeps freezing Europeans out of its markets, the chances of getting such a deal are slight. But Modi's trade philosophy is founded on the Indian self-sufficiency teachings of Deendayal Upadhyaya, to whom his manifesto is dedicated.
  • Among garment makers, the single most commonly quoted example of the last government's ambivalence to business was its failure to deliver its promised reform of India's inflexible labour laws. Modi's manifesto doesn't even go as far on this as his predecessors, saying only that it will "bring together all stakeholders to review our labour laws."

Just pre-election nerves? Listen to Santosh Gangwar, Modi's new textiles minster.

Uncontroversially observing after his appointment that "the textiles sector has a huge potential of providing large number of jobs to the vulnerable section of the society", Gangwar said that "Zari Zardozi [intricate gold embroidery], carpet and many other local crafts...can be a strong source of...employment." He complained how, in his own constituency, the previous government's policy for the Manjha [kite-flying thread] industry meant "ten thousand people were rendered jobless."

Gangwar's traditional crafts certainly do employ millions, and they're probably the businesses his voters want him to be friendly to.

But the growth Modi promised in his campaign needs at least ten million new jobs a year - which means programmes to take mass garment making from China. Vague "business friendliness" isn't enough, and India's already littered with hundreds of SEZs its businesses can't use.

Right now, Modi and his team seem more interested in cotton farming, gold embroidery and kite-flying thread than becoming H&M's preferred source for high quality skirts and blouses. Which means annual job growth in the hundreds, rather than the millions.

Modi's aims for India are extraordinarily ambitious and wide-ranging. If he succeeds in just a small proportion of them, his contribution to India's development will be exceptional. But, on the evidence so far, reversing India's declining share of world garment production won't be among those achievements.

The argument for strongmen politicians is likely to be as unproven at the end of Modi's term in office as it is now.