Facing Goliath

Pakistan’s T&G sector is overwhelmingly export-based, while the opposite is true for India.

Pakistan’s print and electronic media is abuzz these days with the government having granted the most-favoured nation status to India. Similarly, Pakistan’s textile and garment (T&G) industry is all gung-ho about plans to export its products to India. Popular opinion is that our textiles will get an overwhelming response because of our superior quality. But is that really the case? Will our neighbours treat us as their long lost brothers and hand over their lucrative domestic T&G market to us on a silver platter? In my opinion, we would be naïve to think along those lines.

Pakistan’s T&G sector is overwhelmingly export-based, while the opposite is true for India. India’s T&G sector is at least six times larger than that of Pakistan’s. In 2008-09, India produced 54,966 million square meters of textile and clothing. Only 22 per cent of this was exported while the rest was used for domestic consumption. Out of this, 50 per cent was consumed by the household sector, while 29 per cent was consumed by the non-household sector. In comparison, Pakistan produced 9,015 million square meters of cloth in 2008-09, out of which 21 per cent was exported and the rest was available to the local market, according to official records kept by the All Pakistan Textile Mills Association. This does not mean that we are similar to India. As household consumption figures are unavailable, the best guess is that the domestic market consumes only 20 per cent of our production.

The Indian textile industry is very powerful and receives preferential treatment from the government. Last year, Indian importers who were importing Pakistani cotton, suffered huge losses because their industry went back on their contracts due to increasing cotton prices. Recently, the Indian government was forced to backtrack on its plan to give foreign supermarkets access to India’s retail industry. If Indian retailers can prevent global giants such as Wal-Mart and Carrefour from entering India, restricting Pakistan’s textiles would not be an issue for them.

However, there are certain opportunities that the Indian market presents to the Pakistani textile industry. The Indian T&G market is strikingly similar to ours. A large portion of it consists of products catering to traditional-wear that is mostly in unstitched form. Although the Indian market for western style clothing is predominantly fiber-based, in contrast, the traditional-wear market in India is mainly cotton-based. This presents a lucrative opportunity for Pakistani textile industry to carve a niche for Pakistani fabric in India.

Indian consumers spend nine per cent of their disposable income on clothing and footwear. India’s per capita consumption of textiles during 2009 was 23.04 metres, which was about five per cent higher than the previous year’s. India’s per capita purchase of all textiles was estimated to be Rs2,981.92, compared to Pakistanis spending Rs2,134.62 on textile and clothing. This means that the Pakistani textile industry can benefit from the Indian consumers increasing their spending on clothing.

Trade liberalisation with India is certainly a welcome move as ultimately the consumer will benefit the most from this. The Indian T&G market seems promising from the Pakistani exporters’ perspective, but they should keep vigilant as non-tariff barriers pose the most potent threat for them. From the policymakers’ perspective, Pakistan should be wary of these non-tariff barriers and be prepared to initiate countervailing measures if required.

Published in The Express Tribune, March 29^th, 2012.