IMPACT OF SAFTA ON INDIAN TEXTILE INDUSTRY

A strong need exists for the liberalization of the textile sector, noting that protection through high tariffs and small scale reservations had hindered its competitiveness. Indian textile industry can be affected by SAFTA in following ways, • Quality of Textile Products • India’s Huge Consumption • Severe Competition in the region • Inexpensive, abundant and skilled labor force in India • Price Competition • Economies of Scale and Productivity • WTO: Will already be in action in 2005 1.Quality of Textile Products Internationally, Quality of Pakistan’s Textile and clothing is considered to be good than India, therefore after implementation of SAFTA and WTO, Possibly Pakistan will gain more orders from international world. India needs to give a considerable attention in improving the quality of its textile and textile products. 2.India’s Huge Consumption India’s population is much greater than Pakistan, so most of the products are consumed by their home population, leaving lesser amount for export. Some times they have to import from other countries. On the other hand Pakistan being a rich country in the field has quantities spare after its home consumption thus exports to other countries and earns a lot of foreign exchange reserves. India instead of importing far away from other countries, should import from Pakistan. But this thing is possible only when the trade environment is friendly between both the countries. 3.Severe Competition in the region All the member states have opportunities to grow.Entrance and improvement of these LDC’s in the Textile may also make the competition severe in the region. Some of them are already trying to get a respectable place in Asia as well as world. 4.Inexpensive, abundant and skilled labor force in India India's strengths in textile production include inexpensive, abundant and skilled labor force that is suited for labor intensive apparel exports, sufficient raw material supplies because India is third largest producer of cotton with highest area under cotton cultivation in the world. It is still maintaining the position of second-largest textiles producer in the world having a long and deep routed tradition in textile production. 5.Price Competition The threats posed to India include decline in unit values given decrease in prices as this is the key economic rationale for the developed countries to open their markets - welfare gains for their citizens through lower priced goods. 6.Economies of Scale and Productivity Indian industry needs to invest significantly in building scale and upgrading its resources. Moreover, India needs to get rid of its own weaknesses such as lack of economies of scale, low productivity and weak quality control and severe technological obsolescence. 7.WTO will already be in action in 2005 In 2005 WTO will be implemented, making the ways clear for the success or failure of the SAFTA for all the member states. Moreover situation will become clear as to which of these two countries is in a better position to win more orders. WTO can be helpful in successful implementation and administration of SAFTA. Source:R&D Department