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Could India Supplant China as the ‘World’s Factory’?

Garment manufacturers in India say they expect a 25 percent spike in sourcing this quarter as apparel companies pivot orders away from China.

Raja Shanmugam, owner of Warsaw International in Chennai and head of the Tirupur Exporters Association, told the Times of India Friday that he realized a shift was happening when he received an order from German leisure-wear maker Marc O’Polo that would have ordinarily gone to his Chinese competitors.

“We have a huge order,” Shanmugam said. “It’s a litmus test for us and the country. If we crack it, then gates open for more global brands to increase their India sourcing.”

P. Nataraj, managing director of KPR Mills, one of the country’s largest yarn exporters, expressed a similar optimism. “Our buyers have told us that this year sourcing from India will be much higher than last,” he said. “We will know about the actual size of increased orders in a couple of weeks.”

SP Apparels, a Tamil Nadu-based company that specializes in knitwear for babies and children, has been tapped by clothing giant Carter’s to help it develop a new fabric as it moves most of its business out of China.

“If it clicks, then it’s a huge opportunity,” said managing director P. Sunder Rajan, who is working with the Apparel Export Promotion Council (AEPC), the country’s official body for apparel exporters, to draw Taiwanese and Korean partners to the project. “Beating China is tough as they have the scale, but looks like a beginning has been made this time. We will need a lot of support on labor, financial and infrastructure from the government.”

India’s garment sector is the world’s fifth-largest apparel exporter. It employs more than 12 million people in factories, though millions more—mostly women and girls from marginalized communities—work in informal, home-based settings, according to a 2019 study from the University of California, Berkeley. Nearly half of the country’s total apparel exports, which exceeded $16 billion in 2019, head to the United States and the European Union.

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Like neighboring Bangladesh, India has been hit hard by the Covid-19 crisis. In some regions in India, garment workers received more than 50 percent less than their regular income for the months of March, April and May, losing some $379.6 million in wages, according to a report from the Clean Clothes Campaign.

In May, Prime Minister Narendra Modi announced a stimulus package worth 20 trillion rupees ($273 billion), or equivalent to roughly 10 percent of the nation’s gross domestic product.

His administration has also been dialing up efforts to attract factories leaving China in pursuit of even cheaper wages, smaller tariff targets and a diversified portfolio that would be less susceptible to supply-chain snarls triggered by a future pandemic-like event. Indeed, a Gartner survey of 260 global supply chain leaders in February and March found that 33 percent had moved sourcing and manufacturing operations out of China or plan to do so in the next two to three years.

But Covid-19 cases continue to surge in India, even as the country of 1.3 billion people enters a new phase of reopening, with subway trains running for the first time in months. India recorded 85,687 new Covid-19 infections on Wednesday, the world’s highest single-day jump since outbreak began and overshooting the previous record of 77,255 cases set by the United States on July 16. As of Friday afternoon, India’s ministry of health and welfare confirmed at least 3,936,700 positive Covid-19 cases and 68,472 deaths, making the nation the second-worst hit after the U.S.

The APEC said at its annual general meeting Thursday, however, that it expects India’s exports for the 2020-21 fiscal year to rise by 40 percent to some $22 billion, led predominantly by medical textiles, including personal protective equipment, now that export restrictions have lifted. It noted that an initial limited trade package, which government officials have signaled a readiness to sign, could be a “precursor” for a bilateral Free Trade Agreement. The organization also urged the ministry of commerce and industry to review all existing trade pacts with the European Union, the United Kingdom, the United States, Australia and Canada to “remove [any] disadvantages” and help double apparel exports in three years.

Manmade fibers (MMF), in particular, APEC chairman A. Sakthivel said, will be instrumental to India’s garment-manufacturing future as demonstrated by the “global demand pattern.”

“The need of the hour is to quickly engage in product diversification into MMF,” he said, highlighting the need for extensive research and development into fiber bases and processing technologies. “MMF is the key to increasing India’s textile exports to the global market.”