Apparel sector SMEs facing liquidity pressure in India

Amid the global economic meltdown, the apparel sector exporters are witnessing many problems like inventory build-up and liquidity pressure, said Lalit Gulati, president of Apparel Exporters & Manufacturers' Association (AEMA) in an exclusive interview.

He also said that the the SMEs engaged in the apparel sector should explore new markets to enhance the growth prospects.

 

 

What is the role that AEMA aims to play in India's SME sector?

Lalit Gulati: AEMA is committed to the welfare, expansion and promotion of the garment trade for the SME sector. The main aim of AEMA is studying the various laws which affect the working of export industry where SMEs constitutes 60% of the entire apparel exports advocating changes to various central and state governments. The major membership forum of our association consists of SMEs as its members.

 

 

What are the current projects being undertaken by AEMA?

Lalit Gulati: Our association has taken up the issue with Apparel Export Promotion Council (AEPC) in adding one more agency for issuance of Country of Origin certificate for Japan under Comprehensive Economic Partnership Agreement (CEPA) to reduce and ease the rush and delay for issuing the certificate. AEMA is in its endeavor to help exporters with problems like clearing and suggesting to the customs for speedy clearance of pending drawback, advocating changes for smooth and timely clearance of customs cargo.

AEMA is helping AEPC for the effective implementation of it’s baby project DISHA under the sponsorship of Textile Ministry. The project will help the garment manufacturers comply with the global social standards and ease the auditing process.

AEMA is also in the process of bringing a new Textile park under RIICO at Tapukara, Rajasthan. The primary objective of the Textile Park is to provide the industry with world-class infrastructure facilities for setting up their textile units. The scheme would facilitate textile units to meet international environmental and social standards.

AEMA is promoting various garment fairs under the sponsorship of AEPC and FICCI which mainly gives the SMEs sector ample opportunity to explore new markets and promote their business which have been very successful and ample exposure for the SME’s sector.

 

 

How do you think that the Indian SMEs engaged in apparel sector are performing in the present global meltdown?

Lalit Gulati: The pressure is rising consistently as the sector is mainly dependent on exports to the US and European countries. The exporters are witnessing many problems such as inventory build-up and liquidity pressure.

In the present global meltdown, one needs to analyse the changing trends in apparel business across the world and also have to explore new markets. If we compare the growth of apparel industry in past ten years, the Indian apparel industry has experienced rapid changes, primary due to new sourcing avenues and wide markets (both domestic and international). It has successfully put up good performance under market pressure with shrinking demands and tighten prices. The SME sector needs to explore new and virgin markets for growth which is being aggressively hit due to injury.

 

 

What are the key challenges faced by the Indian SMEs in apparel sector?

Lalit Gulati: The availability of fabrics, high cost of logistics, shortage of power supply and cost of power, stringent labour laws and unstable world apparel demand are the major causes which are affecting the SMEs sector.

 

 

Do you think that the apparel SMEs are aptly placed for exports?

Lalit Gulati: Apparel sector is well suited for the SMEs but it has to become more innovative to remain globally competitive. 

  

Do you feel that government policies (both Centre and state) are working in favour of the SMEs? Are they assisting these companies in alleviating the pertinent issues?

Lalit Gulati: Government policies are directed to assist the working of SMEs. However, more changes needs to be done. A major reason for it could be that the SME sector is mostly unorganised. The government needs to work out a conducive policy commensurate with the needs of the Industry.

 

 

Do you feel that ICT (information and communication technology) usage by apparel SMEs is going up?

Lalit Gulati: Information technology is one of the strongest drivers for competitiveness, innovation and change in our modern economy. ICT is changing our lives – the way we socialise, work, shop, search for information, and communicate. ICT enables all forms of innovation, from social to organizational and technological innovation. ICT boosts businesses’ efficiency and competitiveness in the global market. The apparel SMEs have adopted ICT innovation which is an absolute necessity in today’s export field.

 

 

Do you think that Centre has undertaken ample initiatives to strengthen the apparel sector?

Lalit Gulati: The government of India has been making good efforts to promote and support the industry in the post MFA (Multi Fiber Agreement) era. Various stimulus schemes have been announced in the previous years. Some of them are as general reduction of 4% in CENVAT rates, abolishment of the CENVAT on cotton and few other taxes being either reduced or deleted to promote the textiles exports.

The government introduced two packages of duty concessions, tax and interest rebates in past years to provide stimulus to the economy in general to combat the recession.

 

 

RBI's move to leave rates unchanged for the second consecutive policy review has been criticised by India Inc. How do you think it will impact the growth of SMEs?

Lalit Gulati: Higher interest rates are going to hurt the bottom line of SMEs. A separate rate for exporting community would help the sector compete at the global market.

 

 

Kindly share the roadmap of AEMA for the ongoing financial year 2012-13.

Lalit Gulati: AEMA is determined to take up the issues like availability of fabrics, shortage of fabric mills & process houses, modification of infrastructure, higher cost of logistics, Labour related issues etc. with the highest authorities so that we can create a level field for the growth of exports from India vis-a-vis China, Bangladesh, Vietnam etc. and the growth of our industry from 12% to 14% of apparel exports in the coming 4 – 5 years to reach the target of $18 billion.

'Export of non-traditional sports goods should get boost'

In an interview, Trilok N Anand, member of The Sports Goods Manufacturers and Exporters Association (SGMEA) and the Director of Sanspareils Greenlands Private Limited, shared his opinion on the present status of SMEs in the sports industry and also voiced for augmenting non-traditional sports items in the export basket of the sector.

Here are the excerpts from the interview...

How do you find SGMEA's role in sports industry?

Trilok N Anand:The Sports Goods Manufacturers and Exporters Association (SGMEA) is playing the role of a facilitator in the sector and is gearing up for more advancements to provide fillip to the industry.

How are exports playing out for the SMEs in this industry?

Trilok N Anand: The exports of sports goods currently stand at Rs 600 crore per annum, which is just minuscule, compared to the other industries in the MSME sector. The potential is immense and can grow at 40%-50% per annum if the basket of items is increased to include non-traditional sports items.

What are the growth opportunities for the SMEs available in the domestic front? Trilok N Anand: For SMEs, immense growth opportunities exist in the domestic market. However, because of constraints in production, the erstwhile manufacturers have now also become traders and importers and trying hard to build their own brands.

What are the key challenges the sector is currently facing?

Trilok N Anand: First of all, the industry lacks direction and the need to innovate. The industry leaders are content and happy with what they are doing. There has to be a challenge to perform in an outstanding manner, out of box thinking, and excel in areas not touched so far such as non-traditional sports like winter sports, skiing, martial arts, hiking and trekking, baseball equipment, golf equipment, etc.

What according to you are the drawbacks of the 1% hike in excise duty on sports goods announced by Finance Minister in Budget 2012-13?

Trilok N Anand: The government has announced the excise duty hike of 1% to 2% on sports goods. However, on sports gloves, this has been levied at 12%. This is because of Harmonised Code, and these gloves are appearing in Chapter 42, 61 & 62, whereas there is a full Chapter 95 dedicated to Toys and Sports goods in Central Excise Tariff of India. As a matter of fact, all items of sports goods should attract an excise duty of 1% to 2%, or no duty at all, to encourage more and more people to participate in sporting activity.

Lack of skilled manpower is emerging as a major issue for the small sector at the moment. What measures should be taken in this regard?

Trilok N Anand: By its very nature, the sports goods industry is highly labour intensive. We are now seeing a major hurdle in getting workers in the traditional crafts of making cricket balls, cricket equipment, hockey sticks, football and inflatables. The sports industry has to go in for major mechanisation, skill development, and improvement in productivity levels. The skilled labour crunch has been a problem, is a problem, and will be a problem, and industry has to live with it.

What are the growth prospects for new entrepreneurs entering the sport industry?

Trilok N Anand: Growth prospects for new entrepreneurs entering the sports industry are immense. Sky is the limit for them. Unfortunately every new entrepreneur is getting into trading and very few are venturing in manufacturing. The foundation is there for them to build skyscrapers.

Are you satisfied with the Union Budget presented by the Finance Minister recently?

Trilok N Anand: The Union Budget for 2012-13 is neutral for MSME sector. If the government really wants to encourage this sector, apart from what both State/Central governments are doing, the plethora of rules/regulations that govern MSMEs should be eased out. The government should give encouragement to this sector as it is considered as the backbone of the country's economy and creates the maximum jobs, and also creates entrepreneurs for the future.

What according to you have been remarkable developments Central Government made in the sports industry in last 6 months?

Trilok N Anand: Cannot think of anything remarkable. For one the infrastructure for the growth of playing sports is totally missing, along with the Government's various schemes. Sports should be given impetus by making it compulsory in schools. Note: All opinions expressed in this interview are views of the person being interviewed. IndiaMART SME News completely disclaims any responsibility for the views expressed.