There are few challenges more important in India’s journey today, than the need to stoke large-scale employment-intensive manufacturing. The garment industry is a natural place to turn. As an optimist for the possibilities for India in this industry, I see valuable downstream consequences of the infrastructure that is coming up through the `National Industrial Corridor Development Programme’ as well as the PM Mitra parks which were announced earlier.
Ordinarily, the bulk of world manufacturing was locked into China-centric supply chains. Once a complex production process is established by a global firm, they are loath to make any changes as no one wants to rock the boat of a stable production arrangement. The difficulties in China, which have steadily escalated from 2018 onwards, constitute a unique moment in India’s history. We must seize this moment and establish a new level of global activity in India. In the field of textiles and garments, looking to double India’s share from 5% to 10% of global exports would create a $100 billion export opportunity. This one gain would add 5 million jobs directly and of course, many more jobs indirectly when these wage recipients turn around and spend their income to buy goods and services.
Most people think of garment or textile manufacturing as a low skill industry, and this is true. It employs a large number of low skill personnel. Once a worker has the right attitude to work, they can be readily trained on the job to go into production roles. But what needs equal recognition is that garment exporting is a high wire act when it comes to the demands on precise planning and on logistics.
The typical overseas order for garments needs to be shipped out in less than 60 days from receipt of the order. Each stage of production from yarn to fabric to final garment usually occurs in different parts of the country. Often the bottleneck becomes the large distances involved which in turn leads to delays. This is where large industrial clusters can make an enormous difference. We have a great case study of this in Tirupur, a garment cluster in Tamil Nadu that exports close to $5 bn in knitwear. What India needs are many more Tirupurs.
To replicate this model, we need locations with a high availability of low-cost labour but which also have high-quality infrastructure. Everyone in India wants to create more good jobs deep in the Indian interior, and private firms like us have the full incentive to do this, but usually, the infrastructure and connectivity do not exist. Conversely, if firms like us stay at convenient locations like the outskirts of Bombay or Bangalore, we get the requisite logistics, but the return on equity is poor, which inhibits private investment. Transformative gains in logistics, in infrastructure, for underdeveloped regions of India holds the key.
For these reasons, the announcement of the National Industrial Corridor Development program is an exciting initiative. It builds on the golden quadrilateral infrastructure but layers it with plug-and-play infrastructure that can be used to attain global-scale industrial clusters that have network efficiencies.
An amazing feature of Chinese manufacturing is the emergence of the full ecosystem where all kinds of industrial buyers and sellers are available within one or two hours of a truck ride. When we gaze upon the perfection of supply chains in Chinese manufacturing today, it appears almost unattainable anywhere else. But with the right policy push, the same cluster-based strategy can be replicated in India.
In such clusters, the investment decision of each firm is thus not a solitary one but shaped by convenient access to its ecosystem. We see the National Industrial Corridor Development program as reshaping the locational decisions of large numbers of firms, in time. At first, a few first movers will come in even though a lot of their ecosystem is not there. But once they arrive, this will improve the economics for the second wave of factories, and so on. Logistics costs for the early movers at any one location will go down when the late movers choose to establish operations nearby.
The National Industrial Corridor Programme is thus likely to usher in a new stage of Indian capabilities in manufacturing exports. Let us use this opportunity to significantly enhance India’s share in global trade.
