Editorial: Tariff heat on Tirupur’s textiles

India’s textile industry is waiting with bated breath about the course of India-US trade talks, as New Delhi is keen on insulating the talks from the tariffs controversy. Closer home, in Tamil Nadu’s textile hub Tirupur, as elsewhere in other hubs, there is a sense of impending doom as the punishing tariffs are going to cause loss of business and consequently the loss of livelihood of several thousand workers. The DMK-led coalition demanded that the Centre alleviate people’s sufferings.

Earlier, Chief Minister MK Stalin wrote to Prime Minister Narendra Modi seeking not only immediate relief but also to initiate structural reforms to safeguard the interests of industries and their workers. For now, according to media reports, Tirupur and other textile hubs in the country will be able to manage due to the orders placed before the tariffs kicked in. In the coming quarters and the next calendar year, the industry will face the full and debilitating force of tariffs.

The US tariffs will adversely impact the competitiveness of Indian textiles, and importers may look to countries like Vietnam, China, Bangladesh, and Pakistan for cheaper alternatives. It will not be easy for India to find other markets to export readymade garments and home textiles because the US has been a major market, accounting for one-third of total Indian textile exports. The India-UK Free Trade Agreement could come in handy, but marketing and finding importers in a short span of time can be a daunting challenge. The European Union as a whole is a relatively larger market, but the FTA negotiations are still underway. Africa, too, can be a major market for Indian textiles as demand has been on the rise in countries such as Nigeria, Uganda, Kenya, and South Africa. Since African markets are price sensitive, the profit margins may not be very attractive. But keeping the MSME (micro, small, and medium enterprises) units running and workers employed should be the immediate priority. Here, the government can come in to support the vulnerable units with a financial package, tax relief, and other incentives.

India is also looking at a list of 40 countries that could play an important role in its export diversification efforts. Besides the UK, it includes Australia, EU nations such as Germany and France, and developed Asian countries such as Japan and South Korea. Much depends on the government’s outreach programmes. But the textile industry and individual companies, too, need to make concerted efforts on their own to find a toe hold in these countries. The industry and the government need to work in tandem to avert a business and human crisis.

Textile units could be toying with the idea of shifting production units to countries like Indonesia, Bangladesh, and Vietnam. The main motive would be to retain customers acquired over the years by putting in considerable marketing effort. But setting up units would take time depending on factors such as local laws and regulations, hiring skilled and experienced workers, and sourcing raw materials.

This is a wakeup call, and the Indian government needs to rise to the occasion to evolve radically new policy frameworks and structural reforms so that the textile industry steps out of its comfort zone to take up the challenge of innovation, upgrading of quality, improving pricing points, optimising costs and increasing profitability so that it can withstand future vagaries of international trade and unexpected shocks.