Tirupur's Amazing Rise as India's Knitwear Export Hub

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A miracle called Tirupur!
By: Shobha Warrier in Tirupur

One look at the unruly traffic, the noise, the pollution and the dusty, dug-up roads and
you could be forgiven for wondering if you are in one of the many such small towns that
dot the Indian landscape. But you couldn't be more wrong.

This place is pretty special, although there is no
indication to the fact that it is one of the largest
foreign exchange earners for India. Or that the
biggest global brands get their garments made in
this small city and that the garments made here are
sold in the largest retail stores across the world.

Welcome to Tirupur (occasionally spelled
Tiruppur), a city of around 600,000 people in Tamil
Nadu. It has a population of over a million in the
urban agglomeration and has been registering an
annual growth of 30 per cent since 1998.

This city exports knitwear worth Rs 11,000 crore (Rs billion) (Rs 110 billion) a year but
it has no airport -- the nearest one is in Coimbatore (50 km away) and the nearest seaport
is in Chennai.

The first stop for any international buyer of Indian
garments is Tirupur. Buyers from 35 countries
frequently visit Tirupur. Tirupur can deliver
customised samples in less than 12 hours; half a
million pieces in a matter of days.

There is a nondescript railway station at Tirupur and
all the trains that go to Coimbatore stop here for less
than 10 minutes. However, there is an inland rail
container depot at Tirupur.

How it all began

The amazing growth of Tirupur as the Indian hub of garment exports started only in the
late seventies. Before that, this small town was the manufacturing hub of white knit inner
wear (the first knitwear unit in Tirupur was set up in 1925 and it emerged as the

Pursuing excellence in rotational moulding.

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prominent centre for knitwear in South India in the 1940s) thanks to the Noyyal river and
the cotton belt all around the city. With the Manchester of India -- Coimbatore -- next to
Tirupur, it was only natural that the city should evolve as the garment manufacturing
powerhouse of the country.

Initially, knitwear from Tirupur went to suppliers and exporters in Kolkata and Mumbai.
But in the late seventies, Italian garment importer Verona chose to go directly to Tirupur
to buy white T-shirts, and that was the beginning of the rise of a new Tirupur.

In short, Verona was the man who brought European business directly to Tirupur. In
1981, European retail chain C&A also came to Tirupur. In no time, other international
stores too started approaching the garment manufacturers in Tirupur.

Only a handful of manufacturers exported garments
then and the total garment export turnover was
about Rs 15 crore (Rs 150 million) in 1985. By
1990, exports had shot up to Rs 300 crore (Rs 3
billion). Today, almost 80 per cent of India's cotton
knitwear exports happen from Tirupur. There are
6,250 units involved in various operations of the
textile industry here. And the exports stand at Rs
11,000 crore (Rs 110 billion)!

Initially, direct garment exports from Tirupur were only to Europe. The market in the
United States always demanded huge volumes which most of the exporters in Tirupur
were scared to touch. The European market was more fashion-conscious and demanded
goods in only thousands of pieces that Tirupur could comfortably serve.

Those who made Tirupur the export hub

The yarn going around the town is that the very air in Tirupur turns everyone into, first, a
garment manufacturer and then an exporter.

Take for example, Rajan of Rajsujee International, who was a banker once. The success
of many exporters that he dealt with while being in the bank made him set up his own
unit in 1995 with only Rs 200,000 by way of capital and 20 employees. In the first year,
his turnover was Rs 650,000. Today it is Rs 20 crore (Rs 200 million) and 450 people
work for him now. This is not an isolated case; there are many, many such amazing
transitions and rags-to-riches stories in Tirupur.

S Dhandapani of Sreenidhi Apparels Pvt Ltd, a native of Tirupur, decided to start the
company in 1991 because he saw 'everyone' getting into garments exports! "So I also
jumped into this," he reminisces.


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He started operations with Rs 400,000, 15
employees and 10 machines. He was first a garment
supplier to an exporter and then began exporting
directly to Canada, France, Spain and the United
States. Today, his turnover is Rs 20 crore (Rs 200
million) and 300 employees work for him.

Raja Shanmugam, another native of Tirupur, started
Warsaw International in 1989 with a capital of Rs
500,000 and 20 people. In the first year, he did not go for direct exports. And the turnover
after the agent's cut was Rs 20 lakh (Rs 2 million). Next year, he doubled his turnover. In
1993, he decided to venture into the European market directly and the turnover grew to
Rs 2 crore (Rs 20 million). Today, Warsaw International has a turnover of Rs 60 crore
(Rs 600 million) and employs 1,500 people.

According to Shanmugam, there is no way a manufacturer cannot turn in a profit. "This is
the only industry which has a 60- to 90-day cycle. So we can turn our investment over
four to six times a year."

Haresh N Badani of Paras Apparels was one who
entered the fray as early as in 1989. He started his
company with Rs 200,000, six sewing machines and
20 workers. The market was so good that he had a
turnover of Rs 30 lakh (Rs 3 million) in the first
year. In ten years, he grew at a rate of 70 per cent
annually, and by 2008, his turnover had touched Rs
8.5 crore (Rs 85 million).

Another success story is that of Vijaya Kumar, who
started CBC Fashions. He started his company in
2004 with Rs 1 crore (Rs 10 million), 50 machines
and 60 employees as an exporting unit though his
father's parent company had been manufacturing
and supplying innerwear to some of the major
brands in India for 34 years.

His first customer was an importer from Belgium, and in the first year, his turnover was
around Rs 4 crore (Rs 40 million) which grew to Rs 6 crore (Rs 60 million) the next year.

Today, CBC Fashions deals directly with retailers in seven countries in Europe and also
in the United States. The current sales are Rs 40 crore (Rs 400 million). Almost 600
people work for the company.


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Since there are many manufacturers in Tirupur,
there also are many trading agents who act as
intermediaries between the importers and the
manufacturers. Vishal Kumar of International
Trading Inc has seen only growth ever since he
came from Delhi to Tirupur to start his trading
office 14 years ago.

Soon after college, he decided to shift base to
Tirupur because "it was the place where the last
word in textiles was." If it was 20-25 per cent annual growth till recession hit the global
economy; it has been moderated down to 5-10 per cent now.

V S Balraj, managing director of Lea Cool India, has been a buying agent in Tirupur for
the last 20 years. His clients are based in Finland, Sweden, Germany and a few
Scandinavian countries.

The US market and the recession

If Tirupur was growing at 30 per cent every year, the exporters too were growing at an
annual rate of 20-25 per cent. Then recession hit the global economy and exports
earnings to the tune of Rs 11,000 crore in 2007 dropped to Rs 9,500 crore (Rs 95 billion)
the next year, a drop of more than 10 per cent. Almost 40 per cent of Tirupur's exports
are to the US, 30 per cent to Europe and the rest to other parts of the world.

Unlike the fashion-conscious European market, the
US market is voluminous and imports cheap
garments in millions of units. However, the margin
from the European market is double that of the US
market. Buying agent Balraj says that the US
market is as big as Europe and the United Kingdom
together.

With exports dropping, many a textile unit in
Tirupur started to gasp for survival. Thousands of people lost their jobs and returned to
their native places. Those who decided to remain had to work on sharply reduced salaries,
and production was down in many units by almost half.

There is unanimity in the opinion is that units that suffered the most were the companies
that exported only to the US as compared to those who had European customers.


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Shaktivel, president, Tirupur Exporters Association (TEA), corroborates that recession in
the global economy affected exports from Tirupur by around 30 per cent. "There were
huge job losses and there were few enquiries from the US. But now, slowly, we are
getting queries for garments. Things are getting better."

But one man's poison is another man's meat. So it was with Tirupur and the global
economic slowdown as well. Take, for example,
people like Rajan of Rajsujee International. Rajan
benefited a great deal from the recession. As he was
exporting mainly to a discount store in the UK, his
turnover actually went up as during a recession
times, people prefer to shop in discount stores!

Rajan believes that the global market has recovered
by 40-45 per cent already.

Another exporter who saw his turnover increase by as much as 50 per cent, when many
other units were facing closure due to the recession, was Badani of Paras Apparels. As he
was involved in supplying cheap garments to the US, he never felt the impact of
recession. "Because my garments were as cheap as two to three dollars apiece, they were
in real demand. Recession was a good time for me. The US market is huge and the price
is low. If you don't achieve the target, you are finished, but business with the US can bail
you out. That's for sure!"

On the other hand, Dhandapani's business profits went down by 25 per cent during the
recession although his turnover grew.

Two years ago, 40 per cent of the turnover of Raju
Shanmugam's CBC Fashions was from one
customer in the US market. If he had exported
700,000-800,000 pieces annually in the last two
years, the orders came down to 500,000 last year.
There was a more than 20 per cent dip in the
revenues in 2008-09. "Now business has slowly
started to pick up. Enquiries are coming in but what
is worrying the exporters is the strengthening of the
rupee and the weakening of the Euro and the
Dollar," said he.

Cheap goods demand, but Tirupur is getting costly

Although the recessionary trend is now abating and things have begun to look up, what is
worrying the exporters in Tirupur most is the spiralling cost of production. With the hike


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in prices of yarn, electricity and the dyeing cost, the huge increase in the labour cost has
made the garments from Tirupur costlier.

Vijayakumar of CBC Fashions admits that the orders are coming from the US but the
rates they offer are very low which do not offer him, and others like him, much profit
margin.

While the cost of making a garment in India has doubled, the US importer offers the
same price that he had offered three years ago! Even the buyers in Europe who were not
bothered about the price till recently and looked only for quality and fashion want only
cheap goods now.

Badani's advice to those eyeing the US market is,
"Innovate on cheap garments and you will be a
winner."

Labour shortage

Apart from the rising costs, the biggest challenge
Tirupur faces today is labour shortage. On lamp
posts, tree trunks, gates, walls, almost everywhere,
you see handwritten posters asking for people to
work in garment factories.

Perhaps you see these images only in Tirupur and
nowhere else in India. There is a labour shortage of
almost 40 per cent, which is alarming!

Textiles is one industry that is so labour-intensive
that to make one garment, you need the services of
ten people. After agriculture, the textile sector is
the second largest employer in India.

On the gate of the S Dhandapani's Sreenidhi
Apparels, you can see a board asking for people to
join as workers. "Now we have a 20 per cent labour
shortage which will go up to 30-40 per cent once
the recession gets over fully," says Dhandapani.

Most of the exporters feel that a majority of their
workforce who used to come from the southern part
of Tamil Nadu have gone back to their villages
because of the NREG scheme and the Re 1 pre kilo rice that the ruling Dravida Munnetra


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Kazagham government offers. "With free TVs given to all, most of them have become
lazy," S Dhandapani adds.

Bangladesh, the competitor

The next formidable challenge facing Tirupur is Bangladesh which is snatching away
most of the bulk orders from the US. India faces tough competition from Vietnam and
Cambodia, too. Almost 60 per cent of the world's cotton garment market has been taken
over by Bangladesh as their products are 30 per cent cheaper and qualitatively, they are
as good as what India produces!

The underdeveloped tag of the country gives them the additional advantage of the waiver
of import duty in Europe.

Van Raffaini, sales manager of MCS Group of Italy,
has been doing business with Tirupur for the last ten
years. His job is to supply dyeing and finishing
machines. He also does business with Bangladesh.

"There is a quality difference in the machines that
India and Bangladesh use. They (Bangladesh) use
better, technologically advanced machines. So they
produce more garments faster. They have the desire
to get new machines unlike many in India."

Balraj, who also buys goods from Bangladesh, has seen the changes that have taken place
in 20 years. "The golden period for India was the nineties. At that time, we were
exporting mainly to Europe, and we had only China as our competitor. There was no talk
of Bangladesh then. Almost 60 per cent of world's cotton garments were exported from
India, while China dominated the synthetic garment scene. Nobody was price-conscious
then; quality was more important. But price is the major factor today, and India's
dominance is over. Every country now prefers to buy from Bangladesh."

Sensing the importance of Bangladesh, Vishal
Kumar of International Trading Inc has opened an
office there and started sourcing from there too.
"Labour is cheap. Energy is cheap. All the machines
are run by gas. They have advanced technology
because the government concentrates on textiles
exports."

Unless Indian companies add more value to their
products, it will be tough for them to survive, Vishal Kumar feels.


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"Textile exports being the major industry in the Bangladesh, the government there has
given all the facilities to exporters by technologically upgrading all the machines and
setting up huge establishments. Though textile is the second-largest job provider in India
after agriculture, we don't get focussed attention from the government as textiles exports
is only one of the many businesses in India," he adds.

Cost of cotton

Although India is the second largest producer of cotton in the world, the country has less
than 3 per cent share in the textile market internationally. Indian textiles also account for
38 per cent of the country's total exports, but Bangladesh which is dependent on India for
cotton has 6 per cent market share. China, meanwhile, enjoys a 26-28 per cent in the
world market.

Many people feel that if India had worked on its strengths, it could have had a 10-12 per
cent share in the international market. They also
complain that the Indian government exports most
of the cotton that is produced in the country and that
the minimum support price of cotton has gone up by
30 per cent in the last two years.

Consequently, the manufacturing price of yarn too
went up by 30 per cent and dyeing costs went up by
20 per cent. On the whole, there is a 20 per cent
increase in the cost of a garment.

Another problem that exporters face is the firming up of the Indian rupee against the US
Dollar and the Euro.

Future of Tirupur

So is the future of Tirupur bleak? Yes, according to some exporters like Vijayakumar.
"Tirupur will be wiped out if the cost in producing garments increases like this," he says.

According to Badani, "Tirupur grew because of the hard working skilled labour force and
if the labour shortage continues like this, I see the importance of Tirupur waning."
Dhandapani and S Sreethar add their support to this view.

But Tirupur Exporters Association chief Shaktivel sees no challenge to the supremacy of
Tirupur in the near future as he expects exports of around Rs 10,000-20,000 crore (Rs
100-200 billion) this year too, despite the competition from China and Bangladesh, the
dearth of workers, and the escalating costs of making garments.


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Raja Shanmugam and Vishal Kumar also see only growth for Tirupur. "Tirupur is only
going to grow. There is no doubt about it. Products coming from here will change; value-
added items with stress on fashion will become Tirupur's strength."

Like Rajan says, the recession has filtered the all-and-sundry in the field and only the
toughest survived. "So I see only bright future for Tirupur."

For India's sake, one hopes the miracle of Tirupur continues to dazzle the world in
the future too.


Tirupur's Amazing Rise as India's Knitwear Export Hub

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