Pakistan's print and electronic media is abuzz these days as the government has granted Most Favoured Nation (MFN) status to India. Similarly, Pakistan's textile and garment (T&G) industry is all gung-ho about exporting to India. Popular opinion is that our textiles will get an overwhelming response because of our superior quality. But is that really the case?
Would our neighbors treat us as their long lost brothers and hand over their lucrative domestic T&G market to us on a silver platter? The answer is, NO! We would be naïve if we are thinking on those lines. In fact, the ensuing battle for Indian market share would be not be anything less but bloody and we should not expect their industry to play by the book.
Size matters Pakistan's T&G sector is overwhelmingly export-based while the opposite is true for our neighbor. India's T&G sector is at least six times larger than that of Pakistan. During the year 2008-09, India produced 54,966 million sq. meters of textile and clothing. Only 22% was exported while the rest 78% was used for domestic consumption. Out of this, 50% was consumed by the household sector while 29% by the non-household sector. In comparison, Pakistan produced 9,015 million sq. meters of cloth in 2008-09, out of which 21% was exported and the balance 79% was available for the local market, according to APTMA statistics. This does not mean that we are similar to India, this actually means that 21% grey cloth (greige) was exported while the rest was lifted by the mills sector for onward processing, i.e., dyeing and printing. As household consumption figures are unavailable the best guess is that the domestic market is only 20% of our production.
Following table helps in putting things in perspective:
The Indian textile industry is a very powerful lobby and their government gives them special treatment. Only last year, Pakistan's cotton importers from India suffered huge losses because their industry went back on their contracts due to increasing cotton prices. More recently, the government of India was forced to backtrack its plan to give foreign supermarkets access to India's retail industry. If Indian retailers can prevent global giants such as Walmart, and Carrefour from entering India, restricting Pakistan's textiles would not be an issue. It is a well known fact that once a market is lost it is nearly impossible to retake it and Indians have all the tricks up their sleeve to cause disruptions or complete rollback of trade normalisation programme with Pakistan, if they feel threatened.
Indian retail textile and garment market
The Indian market for textile and garments is strikingly similar to Pakistan's. A large portion of this market consists of products catering to traditional wear that are almost in unstitched form. Although the Indian market for western style clothing is predominantly man-made fibre-based, but in contrast traditional wear is mainly cotton-based. This presents a lucrative opportunity for Pakistani manufacturers and traders, who cater to our local market's demand, to go out and carve out a niche for Pakistani fabric in India.
As India grows, so does its purchasing power. Indian consumers spend 9% of their disposable income on clothing and footwear, compared to 6% in Pakistan. India's per capita consumption of textiles during 2009 was 23.04 meters, which was about 5% higher than the previous year. India's per capita purchase of all textiles was estimated to be PKR. 2,981.92 (exchange rate Dec. 25, 2009 - INR 0.588/PKR), in comparison Pakistanis spend PKR 2,134.62 on textile and clothing.
Urban demand pattern for textiles and garments in india
Western-wear:
Cotton shirts: The urban market for cotton shirts stood at 74 million pieces in 2009 (an increase of 5.63% from the previous year). 58% of this consumption originated from the higher income households. Shirts priced more than PKR 382.50 accounted for 40% market share. As Pakistan does not specialize in producing shirts, this segment is of little significance.
Cotton Trousers: Market for cotton trousers increased by 19% (19% increase) in 2009 from the previous year, total size of the urban market for cotton trousers stood at 57 million pieces in 2009. 60% of this was consumed by higher income households. Cotton trousers priced more than PKR 612 accounted for 24% market share.
Denim jeans: The total urban market size for men's denim jeans was 76 million pieces (4% increase) and 11 million pieces for ladies jeans (38% increase). Out of the total, 49% purchases were made by high income households. Men's jeans costing PKR 637.50 and above accounted for 46% of this market, while ladies jeans costing the same accounted for 40% market share. Pakistan can do very well in this segment, particularly if the branded jeans segment is targeted.
Men's cotton T-shirts: 70 million men's cotton T-shirts were purchased by urban consumers, representing 3% increase over the previous year. Men's T-shirts costing PKR 510 and above accounted for 12% of this market. Higher income households represent 14% share of this market.
Traditional-wear:
Men's cotton kurta pajama: Total market size for men's kurta pajamas was 18 million pieces, showing an increase of 80% over the previous year. 38% of this market comprised of purchases from high income households. Kurta pajama costing PRK 476 and above accounted for 32% of this market.
Ladies' cotton shalwar kameez: In 2009, 53 million pieces of ladies cotton shalwar qameez were purchased in urban India, this represents 10% growth over the previous year. 50% of this consumption was done by the higher income households. 11% market share was for products prices PKR 1,147.50 or above.
This segment is set get the most benefit from trade liberalisation programme as Pakistani traditional wear is very well-received in India.
Home textiles
Bedsheets: Market for cotton bedsheets decreased by 1% in 2009 and 60 million pieces were consumed. 34% of this market was from higher income households and products priced above PKR 382.50 accounted for 20% of this market.
Terry towels: Indian urban market size for towels stood at 11 million pieces in 2009 and this segment posted an increase of 22% in 2009. 54% of this consumption was from higher income households and products priced above PKR 255 accounted for 44% of this market.
Trade liberalisation with India is certainly a welcome move as ultimately the consumer will get most benefit in terms of choice; however, the consumer does not have any voice on either side of the divide and hence of little consequence. The Indian market for textile and garment seems promising from Pakistani exporters' perspective but they should keep vigilant as non-tariff barriers remain the most potent threat. From the policy maker's perspective, Pakistan should keep ready it's own secret arsenal to hit below the belt in case our exports are backed against the wall and taking our case to WTO is not a short-term solution.
(The writer is Senior Research Analyst of Pakistan Readymade Garments Manufacturers & Exporters Association)
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