Why Trade Deals Alone Cannot Transform India Into a Major Apparel Exporter
India is currently pursuing an aggressive strategy of signing Free Trade Agreements (FTAs) with numerous countries and economic blocs worldwide. The nation has successfully concluded deals with the United Kingdom, the European Free Trade Association (EFTA), the United Arab Emirates, Oman, and Australia. Furthermore, India has finalized negotiations with the European Union, which represents an exceptionally substantial market, and the ratification process by EU member states is anticipated to occur next year.
Framework Agreement with the United States
A framework agreement has also been negotiated with the United States. Notably, former President Donald Trump has publicly stated that the recent Supreme Court verdict, which struck down certain duties, does not alter the dynamics for a potential India-US trade deal. He emphasized, "They'll be paying tariffs, and we will not be paying tariffs." Many economists express optimism that these comprehensive trade agreements will significantly enhance India's exports in labor-intensive, low-cost sectors such as garments and footwear.
Historical Context and Persistent Challenges
However, such euphoria may be largely unwarranted. The Indian government initiated efforts to promote textile exports over six decades ago, coinciding with the early career of veteran journalist Swaminathan S Anklesaria Aiyar, and continues to pursue similar objectives today with only very limited success. This longstanding struggle highlights deep-rooted structural issues within the industry.
In stark contrast, countries like Bangladesh and Vietnam have established massive garment factories employing up to 50,000 female workers each, capitalizing on labor-intensive production models. Indian businessmen, however, increasingly seek to automate production processes rather than adopt similar labor-intensive methods. This preference stems from the perceived unattractiveness of India's complex labor laws and the plethora of official holidays, which increase operational costs and reduce flexibility.
The automation trend, while modernizing the sector, fundamentally undermines the potential for creating large-scale employment in apparel manufacturing. Consequently, even with advantageous trade deals reducing tariffs, India's apparel export growth remains constrained by domestic policy and industrial strategy choices that do not align with the labor-intensive nature of global garment production.
