Comparative advantages in clothing exports: India faces threat from competing nations

Abstract

Purpose

Manufacturing sector plays a vital role in the economy of developing countries like India. The Indian textiles and clothing industry has an overwhelming presence in the economic life of the country. The readymade garment segment contributes 42 per cent of the Indian textiles exports, which include cotton garments and accessories, manmade fiber garments and other textiles clothing. The overall export basket of India has increased from 13.6 per cent in 2014-15 to 15 per cent in 2015-16 for textiles and apparel products including handicrafts. Though clothing exports from India have witnessed high growth rates in the past decade as compared to other commodity exports, India’s performance, when compared to many competing countries, has not been much encouraging. India has lagged behind in clothing exports as compared to China, Bangladesh and Vietnam. This study mainly focused on analyzing the changing clothing export structure of select countries such as India, China, Bangladesh, Vietnam and Turkey by using revealed comparative advantage indices.

Design/methodology/approach

This study uses different variants of revealed comparative advantage indices, namely, Balassa’s RCA Index (Balassa, 1965), Dynamic RCA index (Kreinin and Plummer, 1994) and Revealed Symmetrical Comparative Advantage Index (Laursen, 1998). Indices were calculated for the period 2003 and 2013 under knitted category (HS 61) and not knitted category (HS 62) up to four-digit classification. Spearman rank correlation was applied for analyzing changes during the period under study. For calculation of RCA and dynamic RCA indices, the export data have been taken from UN Comtrade, an electronic database of United Nation and International Trade Statistics database of World Trade Organization.

Findings

The results highlighted that India ranks at the bottom in seven HS 61 clothing products and fourth in five HS 61 products. Bangladesh stands at the top in 11 of the HS 61 clothing products among selected countries. Similarly, Vietnam has also gained stronghold position in the global clothing trade. In many of these products, Bangladesh has higher revealed comparative advantage as compared to other countries. In HS 62 product category, India was at the bottom in eight products, whereas Bangladesh has gained the most in nine products on the comparative advantage basis. The findings highlighted the shift taking place in global clothing trade structure as trade was shifting toward low-cost countries such as Vietnam and Bangladesh. Surprisingly, India has foregone strategic advantage in many value-added products to low-cost countries such as Bangladesh and Vietnam.

Originality/value

This is one of the few studies undertaken to analyze comparative advantages of leading clothing exporter countries (mainly from Asian region) in the recent times. Findings depict changing export structure and dynamics of clothing exports in the region. Findings would help government, industry associations and policymakers in enhancing sector competitiveness and in identifying the growth products.

Citation

Kathuria, L.M. (2018), "Comparative advantages in clothing exports: India faces threat from competing nations", Competitiveness Review, Vol. 28 No. 5, pp. 518-540. https://doi.org/10.1108/CR-01-2017-0010