UNIT I Introduction to Apparel Manufacturing

CHAPTER 1: ORGANIZATION OF THE APPAREL BUSINESS

LESSON 1: THE APPAREL INDUSTRY

Objectives:
Understanding of the apparel market and industry in Indian and Global
context
Garment exports in the global scenario
Emergence of the mass scale readymade garments market.
Small scale and mass markets

Hello Friends! Welcome to the world of apparel manufacturing or as you may also
refer to Garment Production. As important as it is to design a garment, it is of no use so
long as it is not made into actual clothing. And to make a design more wearable we have to
make it more universal thus giving birth to the concept of mass selling. Now, dear friends
talking about mass selling brings us to the topic of discussion here, which is mass
manufacturing. But before we can undertake a detailed study of mass-scale garment
manufacturing we must have a historical perspective of the development of the readymade
apparel industry.
1.1

HISTORICAL PERSPECTIVE AND MILESTONES

The latter half of the 19th century saw the emergence of the ready-made garment

industry in the world. The department stores set up in the US and Western Europe during
the years 1840-80, increased the consumer accessibility to the ready-made garments,
which helped the initial growth of ready-made garment consumption and production. After
World War I, the manufacturing facilities set up for army uniforms were converted into
ready-made garment manufacturing units. This resulted in the second phase of growth of
the ready-to-wear garment industry.
The year 1920 is considered as the year in which the modern ready-made garment
industry began its rapid climb to prominence. The factory-made clothing gained wide
consumer acceptance and retailers recognized its business potential. The year following
World War II saw further growth of mass production and marketing of garments. Imports to

the developed markets also began to grow. Tracing the history of the Indian ready-made
garment industry, it can be seen that in pre-independent India, clothing styles were dictated
by the dress habits of the dynasties that ruled different parts of India from time to time. The
long years of the British rule in India had a definite influence on clothing patterns in urban
areas. The decentralization of the textile industry witnessed the growth of power looms and
small scale processing unit in India. Mass manufacturing of the garment industry began in
India as an aftermath of the Second World War. The growing settlement of Indians in the
US and UK during the late 1960s and 1970s who acted as importers of Indian cotton
garments, and also the socio-political events of the period led to the a spurt in production
led to proliferation of several small scale sector nature of the garment industry acquired
during this period continues to exert its influence on the growth pattern of the industry.
The various milestones in the growth of the garment industry include:

1.2

Stages of development of the textile industry and its constituents over the last three
decades.
Spurt in growth of garment exports from India during the 1970s
Setting up of Apparel Export Promotion Council (AEPC).
Accelerated growth in the late 1980s and early 1990s
Introduction of long-term quota distribution policies.
GARMENT EXPORTS UNDER QUOTA REGIMES

Now that we are clear on as to the emergence of the readymade apparel industry in
India and the world, a major factor that has determined the international trading of garments
has been the Multi Fiber Arrangement which is to be completely phased out by 31st
December, 2004. Under MFA, the member countries viz. USA, EU countries, Canada and
Norway, were allowed by the GATT to impose quantitative restrictions, i.e., determine
quota, on import of readymade garments and other textile items made of cotton, rayon and
blended fabrics from specified countries including India. This arrangement had adversely
affected Indias exports to the member countries MFA since the exporters from India could
export only up to the quantities various items of readymade garments and textiles as
agreed to between India and the member countries of MFA under respective bilateral textile
agreements. The phasing out of MFA will result in integration of trade in textiles and
clothing with the normal GATT regime i.e. the exporters would not be required to obtain
quota for the export of readymade garments and other textile products.

During the early 1950s, the penetration of Japanese cotton textiles into the US
market became intensive. In order to regulate the inflow of these textiles, the US
administration persuaded Japan to accept Voluntary Export Restraints (VERs). The USJapan VERs dealt with cotton textile exports from Japan, which represented a departure
from the rules laid down by General Agreement on Tariffs and Trade (GATT). Similar
restrictions were placed by the UK administration also on textile exports from Hong Kong,
India and Pakistan for three years from 1959 to 1962. This prompted West Germany and
Canada to seek similar VERs. The VERs were then legalized and an international
agreement under the sponsorship of the GATT through the Short-Term Agreement (STA)
regarding Trade in Cotton Textiles, which covered the period from September 1961 to
August 1962 came into existence. This was for avoidance of 'market disruption'. The sixth
round of GATT negotiations called the 'Kennedy Round' held in 1962, with 62 countries
attending, brought in the Long-Term Agreement (LTA) regarding Trade in Cotton Textiles.
This LTA lasted for 12 years from 1962 to 1974. As the imports of other fiber based textiles
and garments started increasing by the early 1970s, the LTA was replaced by the MultiFiber Arrangement (MFA). The MFA-I (1974-77), MFAII (1978-81), MFA-III (1982-85) and
MFA-IV (1986-94) regulated the world trade in textiles and clothing through quantitative
restrictions (quotas) till the implementation of GATT '94 with effect from January 1, 1995.
The departure of the textiles and garment trade from the rules of free trade and multi-lateral
framework of GATT has lasted for 34 years, with another 10 years for its phase-out. The
Uruguay round of negotiations began in 1986, and the negotiations on textiles commenced
in 1987. By the mid-term review in December 1988, an agreement had been reached to
phase-out the MFA, based on "strengthened GATT rules and discipline". As the differences
in approach over how the textiles and clothing sector should be integrated into GATT
persisted, the negotiations protracted and finally concluded on December 15,1993, and the
treaty was endorsed on April 15, 1994 (GATT 1994). The treaty includes the Agreement on
Textiles and Clothing (ATC), which sets out a time frame of 10 years between 1995 AD and
2004 AD for the phase-out of MFA quotas and integration into the World Trade
Organization (WTO), replacing GATT. Under the quota regime, in the past, India too had
enjoyed an assured export market for garments, and the comparative advantage that India
enjoys in labor, cotton availability etc. remained her underlying strength and guiding
principle. With the phase-out of MFA quotas and termination of the same at the end of the
10-year transition period, the garment exporting countries will be competing intensely with
each other for market share without the protection of a bilateral quota system. This would
dramatically change the market forces impinging on the garment exports from India and,
therefore, the need for transition from comparative advantage to competitive advantage has
become a pressing necessity.

1.3

INDIAN GARMENT EXPORTS SCENARIO

Coming to the recent perspective here is a brief look at the apparel exports scenario
of India in the recent years. Readymade garments, which account close to 13 per cent of
the country's aggregate exports and one of the star performers in 2000-01 salutary export
growth, has registered a substantial decrease both in terms of volume and value during the
first two months of the current fiscal, signaling serious slippage in the fulfillment of overall
textile export target.
Available figures from Apparel Export Promotion Council (AEPC) show that exports of
ready-mades during April-May 2001 amounted to 219.6 million pieces valued at $778.1
million, signifying a decrease of 17.57 per cent in terms of quantity and a massive 24.78 per
cent in terms of value compared to the same period the previous year.
Exports to the US, the single largest market for India, however, did not show any massive
erosion as they amounted to 59.8 million pieces valued at $328.8 million, representing a
decrease of 4.93 per cent in terms of quantity and 16.84 per cent in terms of value against
the previous year period.
Exports to the 15-member European Union (EU) during April-May 2001 was 112.8 million
pieces valued at $287.5 million, a decrease of 1.48 per cent in terms of quantity and 7.44
per cent in terms of value over the previous year period.
Exports to Canada during the period under review amounted to 12.9 million pieces valued
at $39.6 million, registering a decline of 6.52 per cent in terms of volume and 7.26 per cent
in terms of value.
Taking the performance for the calendar year, exports of readymade garments registered a
volume of 582.2 million pieces at $2104.2 million as against 741.5 million pieces valued at
$2825.2 million during January-May 2000. A decrease of 21.48 per cent in volume terms
and 25.52 per cent in value terms.
While AEPC ascribes this decline to the non-availability of export statistics of outside
bilateral agreement (OBA) items which have shown a decline of around 62 per cent, the
downturn in activity in major markets such as the US and the EU might be one of the valid
reasons for the poor show of Indian readymade garments.
AEPC figures for the five-month period of 2001 show that exports to the countries outside
the bilateral agreement during the period January-May 2001 amounted to 77.7 million
pieces valued at $285.8 million. This represents a decrease of about 61.63 per cent in

terms of quantity and 62.57 per cent in terms of value when compared to the previous year
period.
AEPC, however, contends that the figures do not represent actual exports to OBA markets
as the requirement of export certification by the council was discontinued for three to four
months and exporters were making shipments without certification from AEPC.
1.4

THE EXPORT SCENARIO TILL MID-2003

THE country's readymade garment exports during the first month of the current
fiscal, April, registered a handsome growth of 19.09 per cent in volume and 24.02 per cent
in terms of value to quota countries.
Provisional figures compiled by the Apparel Export Promotion Council (AEPC) here reveal
that exports of readymade garments to restricted countries during the inaugural month of
the current fiscal, i.e., April 2003, amounted to 102.4 million pieces valued at $375.9 million.
Export to the United States, the single largest market for Indian garments, amounted to
36.4 million pieces valued at $171.1 million, registering an increase of 10.64 per cent in
terms of volume and 10.46 per cent in terms of value when compared to April, 2002.
Exports of readymade garments to the 15-member European Union (EU) during April 2003
amounted to 62.8 million pieces valued at $190.7 million.
In comparison to the corresponding month of 2002, there has been an increase of 26.10
per cent in terms of volume and 40.12 per cent in terms of value, harboring hope that the
EU market constraints would be overcome by degree in the face of EU's pronounced
preference for repeat anti-dumping investigations into Indian textile and clothing goods,
senior officials of the Ministry of Textiles said here.
An analysis of the readymade garment performance during the first four months of the
calendar year 2003 show that exports of readymade garments to restricted countries during
January to April 2003 amounted to 502.9 million pieces valued at $1864.4 million, which is
a significant increase of 18.33 per cent in terms of volume and 32.45 per cent in terms of
value. This year the readymade garment industry has registered an increase of 2.2 per cent
in export figures for the period from January to June 2003.