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Apparel majors to outsource for skirting excise blow

Reeba Zachariah

India's leading apparel brands, which have been giving multinationals a run for their money may soon sport the "Made in China" or even the "Made in Bangladesh" tag.

That is where most of the popular brand owners seem to be headed, thanks to the Centre's introduction of the new 16 per cent excise duty on both branded and unbranded garments which is making production back home close to being unviable. And some would even look at setting up manufacturing bases outside India.

Salil Chaturvedi, director of Acme Exports, makers of Provogue brand of apparels, said, "The advantage of buying cheaper finished products from abroad will mean no hassles in arranging for intermediate products." Chaturvedi said his brother Nikhil was in Singapore to scout for opportunities.

Avinash Goel, managing director of Freelook, the premium menswear range, said, "We will source garments from Hong Kong, mainland China, Thailand and Bangladesh as this is a better way of controlling overheads." Goel spoke to Business Standard from Hong Kong, where he is in talks to close an outsourcing deal.

Nitin Kasliwal, managing director of S Kumar's Nationwide, which has just launched the Tamariind brand, said: "We are looking at outsourcing to broadbase the supply chain and get better quality products from Indonesia, Sri Lanka and China as the cut-make-trim prices are far lower."

Industry sources said the 16 per cent duty levied on the manufacturers translated into 25 per cent extra cost to the customer and could result in a 40 per cent decline in consumer demand.

Hence the mad rush to import finished unbranded garments from China, Bangladesh, Sri Lanka and Far East, to which local players only have to add their labels.

Some, like Kishore Biyani of Pantaloon India, are even weighing the option of setting up manufacturing units abroad. Biyani said, "We had plans to set up a shirt unit here but the new excise duty regime has changed everything. A better option now would be to move to Bangladesh."

Ajay Kelkar, senior manager, of retail store Shoppers' Stop said that the store was evaluating the possibility of large scale outsourcing of garments from other Saarc countries, but a final decision has yet to be taken.

The readymade garment industry contributes around Rs 700 billion out of the total textile industry turnover of Rs 2,220 billion.

The textile industry contributes 6 per cent to India's GDP and generates 18 per cent of India's foreign exchange earnings. But now, there would be more forex outgo.

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