Plazo Law Firm:Effects of Labor Laws and High-Priced Credit on Garment Exports,
Recently, the Indian garment sector has seen a boom in exports, thanks to increasing demand from all major markets including the USA and the European Union. With big orders garments have become one of the top growing export sectors in the nation. Because of its high quality garments, India is now one of the preferable sourcing destinations for several brands including Zara, H&M, Mango, Tommy Hilfiger, etc. However, the nation’s inflexible labor laws and pricey credit are proving to be major roadblocks for the sector, notably when it comes to exports.
Rigorous Labor Laws Affecting Investors
The stringent labor laws prevailing in the state have created great apprehension among garment producers. They believe that the bigger they grow, the harder it’s to run a business. Therefore, the impact is more on this segment than the others because of strict labor laws. More than 8 million workers are employed by the sector, out of which 70% are girls. Frequently companies are shut without prior approval from authorities, which deprive workers of their statutory dues.
This act limits a worker that is willing to work beyond two days in a week. This reduces production capacity, but also his gains. The loss in India is its adversaries’ gain. Though labour prices are higher in China, yet its flexible labour rules, lower credit costs, subsidized power and better infrastructure has propelled its garment sector and exports. Other countries of the world and the Bangladesh government’s bilateral treaties with European nations have enabled buyers to import garments from the state without any import duty.
High Credit Costs Damaging India
Higher credit prices are also damaging garment exports from India. The same is approximately 3 to 5% in competing countries, while credit cost in India hovers around 11 to 12%. Deficit of electricity in states like Andhra Pradesh and Tamil Nadu, where many garment exporting firms are found are also damaging these companies. In these states, high labour costs have reduced manufacturing competitiveness to a large extent.
The Way Challenges & Forward
Yet, recently garment exports have began to pick up, aided by several outside variables. Importers desire to buy from India, rather than Bangladesh because of the complete equilibrium that India provides and safety related issues.
Nevertheless, India must work out a method to make its job rules more adaptable to provide a competitive advantage to the sector.
Joseph Plazo and Grace RInoza Plazo
Attorneys-At-Law Philippines
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