India's export industry receives external support to develop competitiveness

Industry organizations and the government are providing assistance by improving production lines and know-how.

This report provides an analysis of the performance of key export industries in India last year, and offers forecasts for this year. It is produced by the Hinrich Foundation, a development organization that aims to promote sustainable global trade by, among others, helping create jobs in emerging Asia.

The export industry in India received institutional support from trade associations and the government in 2014 to help suppliers improve productivity and competitiveness.

To keep up with the rising demand for locally made products, manufacturers of furniture, home decor, footwear, ceramics, and table and dinnerware are improving efficiency by upgrading assembly lines to lessen rejection rates. Enhanced training for QC teams and importation of various types of equipment are done to ensure products meet international standards. The national administration has lowered taxes on imported industry-specific machines by 5 percent as an incentive to makers.

Industry organizations are also offering assistance in the form of marketing and trade show training. Information gained from these activities is expected to help SMEs expand into new markets and strengthen their promotional capabilities.

Another way through which the government is helping the industry is by establishing production clusters throughout the country. Clusters are groups of manufacturers concentrated in a single geographical location and make similar or related products. For example, these groups have been set up for the table and dinnerware segment, and members of each group are encouraged to share knowledge and capital to improve the competitiveness of the sector. As each individual supplier is near the others, manpower can also be evenly distributed to increase the productivity of all members in the cluster.

Exports

Foreign revenue across all product lines increased in 2014. This is indicative of the general performance of India's handmade goods exports over the past five years. Some lines such as furniture have developed dramatically in that span of time, expanding by 18 percent annually since 2009. Taking only last year, footwear was the fastest-growing sector as earnings improved by 33 percent. At the same time, it was also the biggest export earner, registering sales of $1.9 billion. This has made India the 10th largest supplier worldwide, accounting for roughly 2 percent of global output.

The US and the EU continue to be the largest overseas markets for handmade products from India. New markets are emerging, and some makers are emphasizing these in an effort to attract additional clients. Because of the real estate boom in the Middle East, demand for furniture is burgeoning in locations such as the UAE and Saudi Arabia. India-made table and dinnerware is gradually becoming popular in Eastern Europe, particularly Poland, Romania, Slovakia and Bulgaria, Latvia and Lithuania. Most of these countries have had steadily climbing orders over the past 12 months. Ceramics are enjoying high demand in the Asia-Pacific region, especially Australia, Thailand and Japan.

Design trends

The use of alternative materials is the dominant product feature among models made in India. In home decor, this is evident in items that have parts and components that come in sustainable materials. Bamboo is used for lamps, banana paper is employed in lampshades, planters utilize coconut shells and vases are made of cane. Recycled inputs are also gaining traction. Scrap iron and old stamp paper are repurposed into wind chimes and miniature paintings, respectively.

Table and dinnerware are also heavily using alternative materials. Glass, ceramic, bone china and wood are some of the components applied in new releases.

Another prevailing trend is the combination of conventional and modern design elements. The former typically embodies bright colors and intricate motifs that are carved, drawn or painted by hand. Contemporary designs have a minimalist look, cleaner profiles and toned-down hues. Ceramics commonly carry this design theme, with vases coming in neutral shades while being embellished with colorful floral, leaf and paisley patterns.

Classic styles continue to be used, but are mainly limited to footwear. Men's models typically have simple designs. Sandals, loafers and formal shoes often come in genuine leather and dark colors for easy customization. Women's models are largely available in modern and vibrant styles. Stilettos, peep-toe heels and strappy platforms are normally available in gold, silver, blue and fuchsia. Trimmings include color blocks, buckles, rope braids and ethnic prints. Plant-derives fibers such as raffia are used to provide texture.

Besides the general eco-friendly theme, multifunction models were another major product design trend last year.

Challenges

High expenditure for raw materials is the most crucial problem confronting India's export industry. This is especially pronounced for furniture suppliers that use wood, particleboard, foam and paint. Combined, the cost of these materials increases by an average of 30 percent annually. This is primarily due to lumber shortage, which is primarily caused by illegal logging. The price of sheesham wood, for one, has surged by nearly 500 percent over the past three years.

Table and dinnerware suppliers also have to contend with the ballooning cost of inputs. Domestic supply of rerolled steel used for dinner-, drink- and flatware is usually insufficient, prompting enterprises to import from China. Buying the material abroad pushes up manufacturing costs by about 40 percent.

Inadequate training and capital is another obstacle facing the industry. SMEs are generally unable to upgrade their production facilities without incurring huge costs. As a result most enterprises are tied down to labor-intensive methods, which compromise efficiency. Among footwear suppliers, this results in becoming heavily dependent on mass-manufacturing exporters that subcontract some processes to them during peak months. Home-based makers are additionally unaware of international standards and QC requirements, which keeps them from gaining valuable export experience. Ceramic suppliers are also facing a similar problem in which inadequate capital prevents them from upgrading kilns and other facilities.

2015 Outlook

Product quotes are expected to generally increase this year because of swelling expenses on raw materials such as wood and leather. The rising cost of manpower is also attributed as a factor behind the imminent price adjustments.

Despite the obstacles threatening the industry, exporters are still optimistic of their export performance in 2015. This is mainly because of stable orders from well-developed markets such as the US and the EU. Furthermore, surging demand from alternative destinations such as the Middle East and Asia-Pacific is fuelling the positive sentiment.

New products this year are seen to feature more decorative designs in terms of motifs and product shapes. Furniture, home decor and ceramics will combine different types of colors with various patterns and embellishments. Footwear will increasingly come in other types of leather such as sheep- and reptile skin, and horsehide. For table and dinnerware, cutlery with fancy contours, plates featuring novelty motifs and chafing dishes with engraved motifs are some of the expected style trends.

For more information about the Hinrich Foundation's industry-specific sourcing reports spanning seven different countries in Asia, including India, visit Online Developing Country Sourcing.

This article and its contents are provided by the Hinrich Foundation, a partner of Global Sources in promoting trade across Asia. The products and the suppliers featured in this article are export assistance program beneficiaries of the Hinrich Foundation.