Indian garment makers are seeking solutions to a crimped labor market and legal restrictions that have kept them from scaling up as an industry. A recent article in the Financial Times illustrated some of the challenges firms have in acquiring and retaining workers.
The nation has an enormous, young, cheap, underemployed labor force, but industry fragmentation and high worker turnover have made it difficult for the garment industry to compete with regional juggernauts China and Bangladesh. India’s textile exports were only $32 billion last year, compared to China’s $260 billion. Bangladesh, with just a small part of India’s population, exported $21 billion last year.
Indian companies are considering adding worker dormitories, as much of the labor difficulty stems from the complicated nature of life in India’s sprawling, disconnected cities. Offering dormitories could provide a dedicated labor supply, and allow companies to provide conditions that could lure more workers from the countryside.
Sanjay Lalbhai, chairman and managing director of Arvind Mills, is planning to add a large garment factory with attached dormitories to his company’s holdings. His hope is to house 2,000 to 4,000 workers and increase production from 12 million to 50 million pieces a year.
The dorms would be a new move for India’s textile industry. However, the strategy is an old one. As far back as the original Lowell Mills, in the early 19th century, garment companies have been providing dormitories for their workers – particularly the young women who often staff the factories. In China, the dormitories are ubiquitous across all sectors of industry.
India is one of the few countries with a large enough population to take up China’s mantle of clothing the world. But infrastructure difficulties and onerous labor regulations have kept the industry from getting off the ground. Now, the current government is trying to bolster exports. There is a window of opportunity, as concern mounts over conditions in Bangladesh, and China becomes more expensive.
Already, exports are expected to jump 30 percent over 2012, to $43.5 billion. The government also recently removed a limitation on how much money could be invested in garment factories, which led to inefficiency and fragmented production. Now, strict labor laws make it almost impossible to engage in the seasonal layoffs that are standard in the industry.
Workers are also prohibited from working more than 48 hours per week, or more than 50 hours of overtime in a quarter. This is a problem in an industry that relies on overtime both to compensate for low base wages and to accommodate seasonal surges in production. Worse yet, Indian women are prohibited from working at night, making 24-hour production difficult.
The current government is aware of the problems caused by the restrictions and is working to ease them.
Many of the garment factories are located in rural areas, drawing workers from nearby villages. However, this model is less viable for export-oriented firms, which need to be centrally located near ports and other transportation infrastructure. Solving the housing challenge will help those mills recruit workers to leave their villages and travel to cities.
In the future, the government hopes to develop planned textile parks, which would have space for worker housing. However, the management of the dorms could prove difficult, due to the high level of cultural fragmentation in India, as well as obvious issues of women’s security. Recent high-profile rape cases have made many families reluctant to let their daughters live away from home. A powerful economic incentive will be necessary.
Mr. Lalbhai said that it is possible that the first factories will have an all-male workforce, to compensate for this issue. Regardless, the math is right for Indian textile factories to capture some Chinese market share. Large business opportunities are sure to generate further innovations.