For global retail stores, the cost of sourcing textiles from India continues to be nearly 33 per cent more than it is in China and 15 per cent more than in other emerging markets like Pakistan and Uzbekistan , according to a global sourcing report by retail consultancy KSA Technopak.
The study looks at the cost competitiveness structures of 75 emerging markets with high apparel exports potential and ranks India at the tenth spot below China, Pakistan, Bangladesh, Vietnam, Cambodia and even Uzbekistan.
According to the report, the net average cost of apparel production and inland transportation in India is about Euro 0.06 per minute compared with Euro 0.04 in China and Euro 0.05 in Pakistan.
"The labour cost and the cost of production in India and China are comparable. But India loses out in a big way because of the greater logistics expenditure in the form of port handling and inland transportation. What it entails is a better infrastructure that can reduce the transportation cost similar to global standards," said Ravi Vaidyanathan, manager (apparel practice), KSA Technopak.
The report said countries like Nicaragua and Dominican Republic have higher labour costs but their productivity levels were higher than India's and Bangladesh's.
"This reduces their overall cost of productivity and also their geographical proximity to the US reduces their transportation cost immensely, making them more attractive sourcing destinations," added Vaidyanathan.
With India's exports not taking off the way China's exports have during the first three months in the quota-free regime, there are apprehensions that the country is losing out to newer competition.
"The real impact of the multifibre arrangement will be visible in the export numbers for the third and fourth quarters of this year. Even the number 10 ranking of India should not be a big worry as not too many of its competitors have the kind of raw material base that we have," he said.
The report advocated that with increased competition and the on-going price deflation, retailers should look to diversifying their sourcing options.
"While there is no question that China plays a very significant role in generating higher margins, resources there are finite, and it may not be the optimal country to do business with; it is certainly not the panacea for buyers," said the report.
The report also pointed out that sourcing of niche, and expensive product categories like blazers and specialty sportswear would be increasingly done out of highly low-labour cost countries like Cambodia, Uzbekistan and Pakistan.
