In a garment hub in south India, R.Okay. Sivasubramaniam is fielding requests from Walmart and Costco who need to sidestep larger US tariffs confronted by rival Asian suppliers, Bangladesh and China. However rows of idle stitching traces at his manufacturing unit lay naked his largest problem.
“Even when orders come, we want labour. We don’t have ample labour,” mentioned the managing director of Raft Clothes which provides underwear and t-shirts priced as little as $1 to US manufacturers.
Thought-about India’s knitwear capital, Tiruppur metropolis within the southern state of Tamil Nadu accounts for almost one-third of the nation’s $16 billion in attire exports, and is looking at an enormous alternative as US patrons discover ramping up sourcing from India within the face of heftier tariffs on different Asian hubs.
US President Donald Trump plans to hit India, the world’s sixth largest textile and attire exporter, with a 26 p.c tariff from July, beneath the 37 p.c imposed on Bangladesh, 46 p.c on Vietnam and 145 p.c on China – all of that are larger American suppliers.
These tariffs will make attire from India rather more aggressive with each Bangladesh and China.
However the temper is somber on the Tiruppur textile park because it faces a actuality examine: India’s hopes of capitalising on its tariff benefit are hindered by a talented labour crunch, restricted economies of scale, and excessive prices.
Raft Clothes needs to develop manufacturing to deal with new orders however is importing high-end machines to automate some stitching processes, given the enterprise for now closely relies on migrant labour, which could be very robust to seek out or retain.
Garment exporters in India say staff should be educated and lots of go away inside months to work at smaller, unorganised items that permit longer hours and pay extra. The bigger producers can’t match them as a consequence of international shoppers’ necessities on price and staff’ circumstances, in keeping with Reuters interviews with 10 producers and attire exporter commerce teams representing 9,000 companies.
Prime Minister Narendra Modi has for years courted international traders to his “Make in India” programme to show the South Asian nation into a worldwide manufacturing hub. A scarcity of expert staff in a nation the place 90 p.c of the labour power operates within the casual sector is seen as an enormous roadblock, particularly in labour-intensive sectors like clothes.
Tiruppur gives a glimpse of India’s labour pressure.
“We’d like no less than 100,000 staff,” mentioned Kumar Duraiswamy of the exporters affiliation in Tiruppur, the place he mentioned greater than 1 million folks at present work.
Modi’s authorities final 12 months mentioned it was extending a programme to particularly prepare 300,000 folks in textile-related abilities, together with garment making.
Within the textile hub, some have taken issues into their very own palms.
Amid a hum of stitching machines on the Cotton Blossom manufacturing unit, which makes 1.2 million clothes a month, together with for American sporting items retailer Bass Professional Outlets, Naveen Micheal John mentioned he has arrange three centres hundreds of miles away to coach and supply migrant staff.
And even then, most return to their house cities after just a few months.
“We talent them there for 3 months, then they’re right here for seven months. Then they return again,” John mentioned throughout a tour of his garment unit, including he needs to take a look at different states the place labour and authorities incentives each could also be higher.
Capability Woes
China’s $16.5 billion value of attire exports, Vietnam’s $14.9 billion and Bangladesh’s $7.3 billion made them the three largest suppliers to America in 2024, when India shipped items value $4.7 billion, in keeping with US authorities information.
US firms have for years been diversifying their provide chains past China amid geopolitical tensions. And even earlier than the information of tariffs in April, now paused till July, Bangladesh’s garment trade started shedding its sheen amid political turmoil there.
A survey of 30 main US attire manufacturers by the US Style Business Affiliation confirmed India had emerged as the preferred sourcing hub in 2024, with almost 60 p.c of respondents planning to develop sourcing from there.
With the tariffs, India’s exports would price $4.31 per sq. metre of attire, in contrast with $4.24 for Bangladesh and $4.35 for China, a pointy enchancment on India’s competitiveness with out the levies, in keeping with Reuters calculations primarily based on 2024 import information from the US Workplace of Textiles and Attire.
But it surely’s within the economies of scale the place India loses.
Bangladesh Garment Producers and Exporters Affiliation says a median garment manufacturing unit there has no less than 1,200 staff, whereas in India, in keeping with its Attire Export Promotion Council, there are solely 600 to 800.
“Bangladesh capacities are big … We’ve got problems with capability constraint, lack of economic system of scale as a consequence of smaller dimension of factories, labour unavailability throughout peak seasons,” mentioned Mithileshwar Thakur of the Indian commerce group.
To handle these challenges, garment makers have began to arrange factories in states the place migrant staff come from, he mentioned.
In Tiruppur, its exports affiliation says the biggest 100 exporters contributed 50 p.c of its $5 billion gross sales final fiscal 12 months, with the remaining from 2,400 items, a telling signal of the fragmented and largely smaller-scale operations.
Raft makes 12 million garment items a 12 months with a workforce of simply 250 folks. A US shopper is near putting an order for 3 million items, which is able to stretch the manufacturing unit to its restrict and power it to contemplate growth.
“This one order is greater than sufficient for us,” mentioned Sivasubramaniam.
Pricing Roadblock
Information from delivery consultants Ocean Audit confirmed Walmart imported 1,100 containers of family items and clothes between April 2 and Might 4 from India, almost double the identical interval final 12 months, together with cotton shirts and pleated maxi skirts.
In an announcement, Walmart mentioned it sources from greater than 70 nations all over the world because it goals to seek out the right combination of suppliers and merchandise.
Whereas US retailers are lodging extra queries in Tiruppur, pricing negotiations stay contentious as a consequence of larger labour and different prices.
Indian brokerage Avendus Spark mentioned in March Bangladesh’s price of labour stood at $139 per thirty days, in comparison with India’s $180 and China’s $514.
P. Senthilkumar, a senior companion at India’s Vector Consulting Group, mentioned India had stricter guidelines for time beyond regulation insurance policies and employee shifts, additional elevating prices.
In Dhaka, Anwar-ul-Alam Chowdhury of Evince Group mentioned most of their US patrons had been sticking with Bangladesh, given the “giant manufacturing capability, decrease prices, and dependable high quality give us a transparent edge.”
In India, although, Tiruppur exporters mentioned they’re in hectic talks with many US shoppers who love the Bangladesh price benefit and are aggressively bargaining.
At Walmart-supplier Balu Exports, Mahesh Kumar Jegadeesan mentioned US shoppers had conveyed “we won’t budge on the worth” and had been prepared to maneuver some orders provided that Indian exporters can match costs.
Contained in the close by Raft Clothes manufacturing unit, the place girls had been stitching underwear, the smile on managing director Sivasubramaniam’s face sparked by 14 new enterprise inquiries of current weeks pale rapidly.
“All need us to match Bangladesh costs. Worth is an enormous downside,” he mentioned.
Reporting by Dhwani Pandya, Praveen Paramasivam, Manoj Kumar and Ruma Paul; Extra reporting by Siddharth Cavale in New York; Modifying by Aditya Kalra and Sonali Paul
