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Apparels segment is growing by 8 percent in America and Europe. Bangladesh's exports have grown by 22 percent. India has 4.5 percent, whereas China has 33 percent market share in the world textile market. Lalbhai is hopeful that the garment exports could improve on the back of Bangladesh's labour issues.
Below is the edited transcript of Sanjay Lalbhai interview on CNBC-TV18
Q: How the next year is going to shape up because you have gone ahead and scaled up your FY14 revenue guidance, revised it to 24 percent versus 20 percent earlier post the good set of numbers you reported in the previous quarter. So you expect the next year to be good as well. Give us the opportunities that you guys are seeing and how it will benefit you in your books?
A: The European market and the American market, which were slow, have started growing well. The apparel segment – the import is growing by 8 percent in America and Europe. Therefore, these two are the largest markets as far as we are concerned, the Indian export community is concerned and this is helping Indian exports though the real benefit of lower exchange rates, depreciated rupee has still not kicked in.
Indian textile exports have grown only by 8 percent and if you compare that with Bangladesh's export. Bangladesh's exports have grown by 22 percent and China, which had degrown last year, has bounced back and is growing by 12 percent this year and this is happening because they are exporting more to Europe than America and their growth is also coming by selling more to South East Asian countries like Indonesia, Malaysia, Thailand.
So, compared to China and Bangladesh, India has not done as well as we had expected it to do. However, in the last three months, in one of the months we have grown by 15 percent. So, there is some growth coming in. Let us see as to how the next three months go but we believe that Indian export should start growing in double digit numbers.
Chokhani: Put some scale to this because if I remembered Indian textile exports are 1/10th of China and Bangladesh in absolutes is larger than us?
A: Not really. We are USD 33 billion, Bangladesh is USD 27 billion and China is huge, at USD 258 billion. The entire world trade is around USD 750 billion out of which China is 33 percent market share and India has only 4.5 percent market share.
Chokhani: So with labour cost going up in China, with the currency benefit, what is holding us back? Is it still our labour loss, power, lack of scale? Why cannot we be 5X?
A: Only lack of scale. I think some of the big companies have gone through a lean trout, possibly something to do with the management issues but we do not have scale. There are so many billion dollar plus companies in China, completely integrated and in India there are no integrated textile companies or there will be very few and the larger ones haven't done well.
The other thing which is missing is that we have not solved the garmenting in the entire value chain and we need to sell the full package to any country beyond Europe and America to increase our export. So because of these two reasons; one is scale and one is not complete verticalisation is holding us back.
Q: You had garmenting project in Bangladesh which you cancelled because of labour trouble to relocate it and also how do you see the future of garmenting over the next 24 months. Are others thinking like you and coming in?
A: We are bringing all the garmenting back into India because we are now going to try with a new strategy. It is difficult to get scale in India because if you locate your garment factory near a village then only the surrounding area villagers will walk in. So, we are going to build very large dormitories and that is what China has done and then we will bring workers who need a job from anywhere in India and house them on the premises. If this experiment is to succeed then we will be able to scale up and have large garmenting facilities located on one location and this is what required.
Q: A follow-up question on the point you made about Bangladesh because now we have seen an upheaval of wage hike and they have certain labour issues as well. Do you think that India's market share could increase because of the issues in Bangladesh?
A: Our exports in garments have grown by 16 percent. So from 33 we are going to move to USD 36 billion. The sectors which are growing; one is fibre export, which is cotton exports, another is yarn export, which have grown by 22 percent and the apparel exports have grown by 16 percent.
Therefore what is not growing is the fabric export but otherwise garment exports are showing much better propensity and one of the reasons is that Bangladesh is finding compliance issues and good amount of business is shifting to India.
Q: You see USD 36 billion in 2014?
A: Yes, this will continue but we need to scale up. Our exports are going to be constrained only because of our scale and our ability to build large factories.
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