NEW DELHI: 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 with SME News.
He also said that the the SMEs engaged in the apparel sector should explore new markets to enhance the growth prospects.
Here are the excerpts from the interview
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?
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.