'China's hunger for raw materials a hassle for India'

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Namrata Kath Hazarika | 01 Apr, 2010
China's strategy to import only textile raw materials from India while selling finished fabrics and garments at very cheap prices to the key global markets is creating hassles for the Indian textile industry, according to industry stalwarts.

Shishir Jaipuria, Chairman of Confederation of Indian Textile Industry (CITI) and Managing Director of Ginni Filaments told SME Times, "China is a big importer of Indian textile products, but they usually purchase cotton yarn from India. China is a big importer of raw material from India and not finished garments."

He said that the Chinese textile industry has made Indian textiles less competitive in the world market. China is following a strategy of importing only raw materials from India. China is always reluctant to purchase any finished items from India, as they (China) are efficient enough in the manufacturing process of garments in comparison to India.

The Secretary General, CITI, D.K. Nair viewed, "China will never purchase finished goods from India as they (China) have their own manufacturing base, which gives potential value addition to the world buyers."

Commenting on China-India bilateral relationships, he highlighted that it is high time for both the parties to cooperate and broaden investments between both the nations.

Nair added that India-China can cooperate to expand business ties. But as China is competitive producer of garments, they will never purchase garments from India.

He said, "They (China) are a competitive producer of garments. India has world-class cotton and yarn. So, China usually manufactures fabrics and garments via importing cotton and yarn from across the globe. They manufacture the finished products and sell those stuff produced by them to all the neighboring countries including the major key markets like US, Europe and Japan."

The global buyers also prefer buying Chinese goods as they are cheap. India has a difficult policy system and many other problems which make the country uncompetitive in the world market, Nair pointed out.

When asked about the imbalance of trade that India-China is sharing at the moment, he added, "China has paucity in balance of trade with all other countries of the world. They won't import value-added products from any country. Their strategy is to protect value-added products and import only raw materials as they have good manufacturing base and also upgraded technologies and machines."

Nair highlighted that India's manufacturing industry is very weak. India faces a lot of infrastructure problems, power cuts, road problems which need a focused attention from the government. Due to these problems, India is not being able to compete with China.

Recently, Amit Mitra, Secretary General, Federation of Indian Chamber and Commerce (FICCI) opined that 70 percent of India's exports to China currently comprises only raw materials rather than finished products. India has to extensively increase its exports of value-added products, which have huge demand in the Chinese market.

India has to look into these aspects very minutely so that exports to China from India get intensively strong in near future, further reducing the trade gap between India and China sooner, he said.

There is no doubt that China is keen to enhance business ties with India. But, it is requisite for India and China to understand each other's needs, Nair said.

Chinese business leaders and government also expect India to permit Chinese companies to manufacture and invest in India, which thereby would boost manufacturing of value-added products in India thereby stepping up India's manufactured exports to China.

China is importing lots of cotton and yarn these days. Informing SME Times, Nair said, "They are exporting lots of fabric and garments and importing lots of cotton and yarn at the moment. If we (India) do not export cotton and yarn they will import from other countries. They can get better cotton also from the USA and Egypt."

"The point is when India's cotton and yarn goes outside from the country, our spinning industries get affected. We (India) lose the trade. India's cotton is good, but there are also good cotton-supply coming from other countries as well," he added.

Jaipuria was worried about China's global shares in textile and clothing which is around 35-40 percent currently. He said, "China usually manufactures garments in their country and exports to major destinations like the US, Europe and Japan. China has large volume of share in the global market but India's global share is around 3-4 percent. India has lot of scope for extending share in the global market."

It has been repeatedly pointed out by the industry that either cotton exports should be banned or there should be a control on the high quality cotton exports from going out to the western countries.

Exporters have requested the government to impose some duty which can hinder exports of cotton from India. But, the government has not taken any initiative yet.

If India wants to increase it's bilateral trade with China, India has to export value-added products to the Chinese market, Jaipuria added.

India-China at present share a bilateral trade of USD 60 billion, which is expected to take a fillip in due course of time.