Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Textiles, BPOs & more... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Sep 4, 2008

    Textiles, BPOs & more...

    Textiles in trouble, in India and China
    The fastest and the second fastest growing nations in the world, India and China, have more in common besides their populous demographics. These countries are both the largest manufacturers and exporters of textiles thanks to their skilled and cheap labourers.

    Over the past decade, as the divide between the compensation levels of workers in the East and the West became wider, there was drastic migration of textile production from the US, Europe and Japan to countries such as China, India, Pakistan and Bangladesh. This was also due to the fact that some of the latter were the largest producers of cotton and silk. Currently, more than 70% of world's cotton is consumed in Asian countries, with China holding a dominant share of 42%. China and India, particularly have become the largest exporters of superior quality fabrics and made ups and are also the sourcing destinations for some of the best-known brands globally.

    However, what started as an advantage is now becoming the reason for adversity as mindless and highly leveraged capacity expansions have landed the textile manufacturers into trouble. Particularly denim, which has a vast unorganised market, has lost its pricing power with global capacity (7.7 bn yards) far outstripping its demand (6.5 bn yards) per annum. While Indian textile manufacturers are bearing the brunt of high leverage cost and shortage of power supply, the Chinese ones are losing their competitive advantage of cheapest labour cost to other emerging producers such as Bangladesh and Vietnam.

    The revered Chinese textile industry is reeling under an 18% rise in the value of its currency since 2005, as well as higher costs of labour, fuel, electricity, chemicals, cut in domestic tax rebates and pollution curbs. Labour costs in China are now double those in Indonesia, Vietnam, Pakistan and Cambodia. Many mills have been forced to switch from exports to domestic sales, which now account for 79% of production. In addition, big retailers such as Wal-Mart have developed distribution channels around the world, which has lent them enormous bargaining power, thus squeezing the margins of manufacturers. Its time for Indian textile companies to do some rethinking before things get worse for them as well.

    Attrition rates mar BPOs
    Known as the back office of the world, India positions itself firmly amongst the fastest developing nations in the world due to its USP of offering high quality services at cheaper rates as compared to those in the developed nations. However, the BPO Special Sector Survey 2008 reveals that attrition rates in India's business process outsourcing (BPO) industry are about 7.8% higher than in other industries. The report states that in general, staff turnover in India is 15.7%, but in BPO companies, attrition rates are at 23.5%, followed by Communications (22%) and Retail (18%). The report explained that one of the factors of employee dissatisfaction is that the remuneration structure design is not as attractive when compared to other industries in India. This coupled with working shifts, lack of career development and monotonous tasks has led to high turnover rates.

    The BPO industry is a critical sector in the Indian economy, valued at approximately US$ 11 bn and employing over 2 m people. However, if the industry is to achieve the projected US$ 30 bn size by 2012, it will have to tackle this talent attrition issue more proactively.

    Life after Reddy
    Dr. Y.V. Reddy's replacement as the governor of the central bank has kept people debating as to whether the new governor will use the same monetary tools and have similar inflation handling strategies as the incumbent one. However, what is not being highlighted is whether or not the new governor will stick to the reformist measures adopted by the governor with regard to creating a roadmap for foreign players, consolidation of the industry and making the PSU banks more efficient and accountable. Thus, it is for us to see in which direction the new captain of India's financial governance vehicle steers the wheels.

  • Also read - A change in guard



    Equitymaster requests your view! Post a comment on "Textiles, BPOs & more...". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    The Key Factor Pushing Gold Up These Days (Outside View)

    Aug 21, 2017

    PersonalFN explains the chief factor pushing gold prices up of late.

    How Unique Are the Companies You Invest In? (The 5 Minute Wrapup)

    Aug 21, 2017

    One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 (Close)