As an entrepreneur and businessman I always keep a finger on the pulse of the market. The other day while surfing the net I was alarmed to see that the IMF has projected India’s per capita GDP to dip below our little neighbor to the left.
I have visited Bangladesh several times and was appalled at the poverty in the country. The country is so poor that one wonders what karma befell this lot. India is known as a third world country, a poverty-stricken nation on the world map, yet it was painful to see Dhaka and Chittagong. However this little neighbor has been doing something right over the past few years.
In my blog way back in 2017 https://rkshah.blog/2017/06/28/how-the-apparel-industry-can-solve-indias-unemployment-problem-in-the-short-term/ I had written about this. Quote Unquote from the previous blog, a sentiment which I maintain to this day ”While Bangladesh and Vietnam have made huge strides thanks to their governments’ export policies, India has adopted an inverted developing economy model. Government policies in Bangladesh and Vietnam actively promote the growth of their apparel industries, like their bilateral negotiations with Europe and Japan to get duty free imports, which India failed to negotiate”. Three years hence my words almost prophetic as we see our smaller neighbor perform better than us.
The Bangladesh government has focused on this industry by creating an export zone exclusively for apparel, building an eco system for all supplies related to garments, favorable labor laws, lesser government regulation and negotiating duty free trade with US, Europe, Japan including India. This has also helped draw foreign investments from countries like Korea, China and Japan. Thus by building on this industry they have managed to raise the per capita income by generating jobs at the bottom of the pyramid. All of this in spite of having no textile manufacturing heritage, poor infrastructure and ports, poor connectivity with the world and frequent natural calamities.
Look at India in contrast, when we opened up our market for single brand retail, the law stipulated 30% manufacturing in the country per year. This was amended to 30% over 3 years and further to that 30% including exports by single brand retailers like H&M, Zara and Uniqlo. An industry which could have been a source of employment to the unskilled masses has been systematically crippled. We’ve been late at negotiating with the world markets, today having access only to Japan. To further add fuel to fire, it still baffles me, how we gave duty free access to Bangladesh. The Indian consumer may believe that purchasing Indian apparel brands means creating jobs in India but a large percentage are imports from Bangladesh. On a platter, we’ve handed over this sizeable garment industry to Bangladesh.
The IT, Mobile Manufacturing and Defense sectors employing skilled workforce will definitely draw income, but onto the plates of a few. As per the article by Financial Express dated 19th March 2019, the proportion of formally skilled workers in India is extremely low, at 4.69% of total workforce, compared to 24% in China, 52% in the US, 68% in the UK, 75% in Germany, 80% in Japan and 96% in South Korea.
The garment industry in India is still a largely unorganized and unbranded sector. I strongly feel that with the right focus and impetus from the government, this can be a problem solver to the significant unskilled and unemployed, in our nation. Our future and progress lies in tapping this unskilled workforce. It is high time that we stop looking only to the West for solutions. It’s time to look closer home, some solutions are just next door!
Opinions in this piece belong to the author: Ramesh Kumar Shah
Ramesh Kumar Shah is the founder of the RK Group, founder of RK Trust (rktrust.in) and co-founder of Harvard Business School Angels of India. Apart from being a businessman, he is keenly involved in making as much of a difference in people’s lives as he can, most recently through the Let’s Mask India initiative, that provides a free mask to all the residents of Bangalore.