India’s Knitwear Capital Strives To Ensure Its Future
TIRUPUR, India — Over the last 20 years, this small town in southern India has grown from a nondescript hamlet to become the country’s knitwear capital, providing more than a quarter of the nation’s garment export revenues. Home to more than 5,000 garment factories — mostly small to medium-size — the city is a sourcing base for both Indian retailers and global brands, including Puma and Gap.
But in the last year, Tirupur has seen an 8 percent decline in production and the industry’s executives have been forced to examine ways to ensure its future.
Revenues of the Tirupur-based garment industry were 240 billion rupees, or about $4 billion at current exchange rates, in the financial year 2017–18, out of India’s total apparel export revenues of $17 billion. Nearly 40 percent of Tirupur’s production is exported to the European Union, 35 percent to the U.S., and the remainder to other parts of the world, including Russia.
A. Sakthivel, a large and powerful man, owner of Poppys Knitwear and former president of the Tirupur Exporters’ Association (TEA), has been keeping a close eye on the changing ethos in the city for the last 35 years, making representations to state and central governments, and keeping in touch with the tightly knit community that owns the city’s factories.
Like many people in this area, he is driven by sentiment and faith — his office is blessed by dozens of idols, and the community is known to encourage a strong clan sentiment to help each other grow. He discussed some of the reasons for the town’s declining production, with global factors being key.
“A key difference has been the systems of preferences that our neighboring countries have, giving them a lot of growth opportunities,” Sakthivel said. “This is true of Bangladesh, Cambodia, Myanmar and Sri Lanka. Bangladesh, for example, also has government support and factory size — and in both aspects Tirupur is unable to compete. While China was declining, their invisible invasion was happening in all these countries. Chinese are very effectively using their advantage in technology and the investment factor and they are clubbing those with other advantages in countries which have a special advantage of being underdeveloped, or better export terms with the United States or the European Union. That makes the prices from India higher than the neighboring countries, allowing them to grow vastly at the cost of the Indian industry.”
Tirupur is just over an hour’s drive from the nearest airport at Coimbatore, with a broad, well-planned highway and Uber and plentiful, conventional taxi connections. But traffic within Tirupur is scattered and heavy, the factories woven into the city’s fabric, some in residential areas, but almost all are in stand-alone factory buildings.
The city’s roads are dotted with shops selling ready-made knitwear for $1 or
$2, with the surplus providing plentiful shopping for local residents and visitors, and areas like Kaderpeth famous for the surplus sold at both wholesale and retail rates.
These shoppers aren’t complaining about a fall in production or sales. But factory owners are concerned.
Raja M. Shanmugham, president of the TEA, explained that the fall in production is also largely a result of macroeconomic changes within India, which have deeply impacted small industries. “Demonetization was a rude shock, followed by the goods and service tax. Though it is good for the nation but the shock wave has created a fear psychosis across the spectrum. India has had to undergo these two shocks. That has been evident in the 8 percent slippage. 2015–16 was a growth of 8 percent, so put together there was a 16 percent visualized fall in the industry,” he said.
What is it that made Tirupur special, to enable it to overtake most other regions in the country, including Ludhiana, Bangalore, and the New Delhi area?
“Nothing special is the special factor,” Shanmugham told WWD, describing what has been the dramatic growth of the city into a competitor for knitwear with the earlier northern city center of Ludhiana, and then the leader. “We had no water, no roads; Tirupur is devoid of all natural and artificial advantages. There is no seaport or airport for trade activities, there was no drinking water available — we had to source it from a distance. Even the road connectivity was not good. The entire area was a drought-prone area. Despite all these factors, it has grown. One of the reasons for this growth has been that it acts like a real cluster,” he said.
Sivaswamy Sakthivel, executive secretary of the TEA, has a different perspective from A. Sakthivel, the former president of TEA who shares the same last name. An erudite and educated man who starts out each day scanning the changes in technology and shares these on several WhatsApp groups to ensure a reach to all TEA members, he described how this success has been driven by both the cluster concept and the interconnected nature of the community, a unique feature of India and the region.
“The coexistence of micro-, medium[size firms] and corporate structure, with a cluster system means that no single factory needs to be able to do everything,” he said. Factories that work closely with each other in the form of a cluster for dyeing, a cluster for sewing and a cluster for finishing make it possible to start with lower capital and ►
Tirupur, in southern
India, has 5,000 factories — but its focus on cotton is resulting in challenges.