Globalization Strategies in textile

(Taken India as an Example)  

By Amal Anilkumar Ezhava  

Project Manager  Urdhva Management Pvt Ltd 

Summary Points 

• Labour Reform 
• Land Reform 
• Lack of a Strong Agent System 
• Weak Manufacturing Sector 
• Fragmented Supply Chain 
• Increase in the Informal Sector within Textile Weaving and Processing  

Globalisation  

Globalisation refers to the increasing interconnectedness and interdependence of the world’s markets and businesses. This process is driven by international trade, investment, and information technology  

Free Trade Agreement (FTA)  

An FTA is a pact between two or more countries to reduce or eliminate barriers to trade, such as tariffs, quotas, and import restrictions. FTAs aim to facilitate smoother and more efficient trade flows.  

Implications of FTAs in Textiles  

Economic Growth: Job Creation: Consumer Benefits: Challenges for Domestic Producers:  

“As the world shifts its focus away from China as the primary manufacturing hub, India emerges as a leading contender to spearhead the next phase of globalisation. By leveraging its robust Free Trade Agreements (FTAs) and key industries, India has the potential to drive global development and foster international collaboration” 

Globalisation and FTAs offer substantial advantages to India’s textile industry, such as enhanced labour standards, improved land utilisation, and significant growth opportunities through expanded market access and increased exports. However, these benefits come with notable challenges, including inefficiencies due to a lack of a strong agent system, threats to domestic manufacturing from cheaper imports, fragmentation of the supply chain, and the rise of the informal sector with its associated problems.  

To fully leverage the advantages while mitigating the disadvantages, India needs to implement effective policy reforms and industry initiatives. Collaboration among stakeholders, including the government, industry leaders, and labour organisations, is crucial to address these challenges. By doing so, India can ensure sustainable growth and development of its textile industry in the context of an increasingly globalised economy.  

Advantages  

1) Labour Reform:  

• Improvement in Labour Standards and Working Conditions: Globalisation and FTAs can be a driving force behind the improvement of labour standards and working conditions in India’s textile industry. With the integration into the global market, there is a greater push towards adhering to international labour standards. This pressure comes from multinational companies, international organisations, and consumers who demand ethical production practices.  

• Incentive to Enforce Labour Regulations: The need to maintain a competitive edge in the international market encourages the Indian government to enforce labour regulations more rigorously. This includes ensuring fair wages, safe working environments, and reasonable working hours, which can lead to an overall better standard of living for workers in the textile industry.  
• Enhanced Reputation and Investment Attraction: By complying with global labour standards, India can enhance its reputation as an ethical textile producer. This reputation can attract foreign investors who are increasingly concerned about social responsibility and sustainable practices. Additionally, it can open up new markets where ethical sourcing is a key requirement. 

2) Land Reform:  

• Attraction of Foreign Direct Investment (FDI): FTAs can facilitate foreign direct investment in the textile sector. This investment can lead to land reforms aimed at optimising land use for textile production. Better land utilisation can result in increased agricultural productivity for raw materials like cotton, which is crucial for the textile industry.  
• Modern Infrastructure and Technology: Investments from global entities often come with advanced technology and modern infrastructure. This can improve the efficiency of land use, reduce waste, and enhance overall productivity. The modernisation of facilities and the adoption of new technologies can also help in producing higher-quality textile products.  

3) Stimulating Growth:  

• Market Expansion and Increased Exports: Globalisation and FTAs open up vast opportunities for Indian textile companies to expand their market reach beyond domestic borders. Access to international markets allows for increased exports, which can drive significant economic growth.  
• Diversification of Product Offerings: Exposure to global markets encourages Indian textile manufacturers to diversify their product range to meet varied international demands. This diversification can lead to innovation, improved product quality, and the development of niche markets.  
• Economic Development and Employment: The growth stimulated by globalisation and FTAs can create numerous employment opportunities within the textile industry. This can contribute to overall economic development by reducing unemployment rates and boosting the incomes of those employed in the sector. 

Disadvantages  

1) No Strong Agent System:  

• Inefficiencies and Communication Challenges: The absence of a robust intermediary or agent system can lead to inefficiencies in the textile supply chain. Poor coordination and communication gaps can result in delays, increased transaction costs, and potential loss of business.  
• Need for Reliable Agents: Establishing a reliable and efficient agent system is crucial for streamlining operations and improving the competitiveness of Indian textile manufacturers in global markets. Agents can facilitate smoother transactions, better customer relations, and more efficient logistics.  

2) Limited Manufacturing Sector:  

• Threat from Cheaper Imports: While FTAs open up global markets, they also allow for the influx of cheaper imported textiles, which can undermine the competitiveness of India’s domestic textile manufacturing sector. Local producers may struggle to compete with the lower prices of imported goods.  
• Impact on Domestic Manufacturing: A decline in domestic manufacturing can lead to job losses, reduced innovation, and increased dependency on imported textiles. This scenario can hinder industrial growth and diminish self-sufficiency in the textile sector.  

3) Fragmented Supply Chain:  

• Challenges in Logistics and Quality Control: Globalisation can lead to a fragmented supply chain with production processes spread across various regions and countries. Managing such a dispersed supply chain can pose significant challenges in logistics, quality control, and coordination.  
• Increased Operational Risks and Costs: A complex supply chain increases the operational risks and costs for Indian textile manufacturers. Issues such as delays, inconsistent quality, and higher transportation costs can adversely affect the industry’s profitability and efficiency. 

4) Rise of the Informal Sector:  

• Growth of Informal Practices: Globalisation can contribute to the expansion of the informal sector in the textile industry, particularly in weaving and processing. This sector often operates with informal practices, including non-compliance with labour and environmental regulations.  
• Issues of Working Conditions and Environmental Concerns: The informal sector’s growth can lead to poor working conditions, low wages, lack of social security, and environmental degradation. These issues not only affect the sustainability of the textile industry but also tarnish India’s reputation in the global market.  

In conclusion, globalisation and Free Trade Agreements (FTAs) present both substantial opportunities and significant challenges for India’s textile industry. On the positive side, these processes can drive improvements in labour standards and working conditions, attract foreign direct investment, and stimulate economic growth through expanded market access and increased exports. Enhanced land utilisation, adoption of modern infrastructure, and technology can further boost productivity and product quality.  

However, the industry must navigate several hurdles to fully capitalise on these advantages.  The absence of a robust agent system leads to inefficiencies and communication challenges, while the influx of cheaper imports can undermine domestic manufacturing. Additionally, a fragmented supply chain increases operational risks and costs, and the rise of the informal sector brings about issues related to poor working conditions and environmental concerns.  

To address these challenges and leverage the benefits of globalisation and FTAs, India must implement comprehensive policy reforms and foster collaboration among all stakeholders, including the government, industry leaders, and labour organisations. By focusing on strengthening the agent system, supporting domestic manufacturing, streamlining the supply chain, and formalising the informal sector, India can ensure the sustainable growth and development of its textile industry in an increasingly interconnected global economy. This strategic approach will position India as a key player in the global market, driving forward the next phase of globalisation and fostering international collaboration.