According to the Economic Survey, India is witnessing a 'historic opportunity' to take over China in the apparel, leather and footwear sectors but it is being outrun by its neighbouring East Asian economies.
The survey touched upon India's declining share in global cattle population and exports of cattle hides. The Survey said that limited availability of cattle for slaughter in India is leading to a loss of potential comparative advantage due to underutilisation of the abundantly available natural resource for the leather sector.
The Survey added that in spite of significantly lower wages than China, countries such as Bangladesh, Vietnam and Myanmar have outpaced India in these sectors.
The Survey said, "The window of opportunity is narrowing and India needs to act fast if it is to regain competitiveness and market share in these sectors."
The monthly wages for semi-skilled workers in India ranges between USD 81 and USD 119, while in China its USG 250-300. India's wage costs are even less compared with Vietnam and Indonesia but challenges of logistics, labour regulations, tax and tariff policy have put India at a disadvantage in a global scenario.
These difficulties have led to several Indian firms choosing to relocate to Bangladesh, Vietnam, Myanmar and Ethiopia. All of these factors have brought India's share in global exports of apparel, footwear and leather to less than 5 percent, falling behind countries such as Bangladesh and Vietnam.
Being labour intensive, apparel and leather sectors have been provided subsidy by government for increasing employment but a lot more needs to be done if India wants to create more jobs and opportunities for exports and growth.
The Survey said the government needs to take up a number of labour reforms to overcome the obstacles of employment generation and also bring in the Goods and Services Tax (GST) for tax rationalisation.
Noting that all economic growth take-off in East Asia has had a direct correlation with the clothing and footwear exports, the Survey said India has underperformed in these sectors.
At a GDP growth rate of 7-10 percent in East Asian economies, the average annual growth of apparel exports was between 20 percent and 50 percent, while it was more than 25% in case of leather. For India, this figure has been 12.7 percent and 5.4percent respectively, showing a huge untapped potential.