http://www.metacafe.com/embed/11390662/Plazo Law Firm:Effects of Costly Credit and Labor Laws on Garment Exports,
Lately, the Indian garment sector has witnessed a boom in exports, thanks to growing demand from all major markets including the united states and the European Union. Due to the high quality garments, India has become one of the preferred sourcing destinations for several brands like Zara, H&M, Mango, Tommy Hilfiger, etc. On the other hand, pricey credit and the nation’s inflexible labor laws are proving to be important roadblocks for the sector, notably when it comes to exports.
Stringent Labor Laws Affecting Investors
The stringent labor laws prevailing in the nation have created great understanding among garment manufacturers. They consider that the larger they grow, the more difficult it’s to run a company. Therefore, the impact is more on this segment than the others because of strict labor laws. Frequently companies are shut without prior approval from authorities, which deprive workers of their statutory dues.
This act confines a worker that is willing to work beyond two days in a week. This reduces output capacity, but also his gains. The loss in India is its adversaries’ gain. Though labor 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 states of the world and the Bangladesh government’s bilateral treaties with European nations have enabled buyers to import garments from the country with no import duty.
High Credit Costs Hurting India
Higher credit prices are also damaging garment exports from India. The same is around 3 to 5% in competing countries, while credit cost in India hovers around 11 to 12%. These companies are being also hurt by shortage of electricity in states like Andhra Pradesh and Tamil Nadu, where many garment exporting businesses are found. In these states, high labour costs have reduced manufacturing competitiveness to a large extent.
The Way Forward & Challenges
However, recently garment exports have began to pick up, aided by several outside factors. Yuan’s rise against the dollar and labour unrest in Bangladesh has worked in India’s favor. Importers now want to buy from India, rather than Bangladesh because of safety related issues and the overall stability that India provides.
The Government of India has taken initiatives to attract investment in the sector. However, India must work out a way to make its labor rules more flexible to provide the sector with a competitive edge.
Joseph Plazo (click through the following website page) and Grace RInoza Plazo
Attorneys-At-Law Philippines
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