A Study of Competitiveness

of the Garment Export Sectors of India

and China: Revealed Comparative
Advantage (RCA) Analysis
Lalit Mohan Kathuria*
The textiles and garment sector is one of India's significant economic sectors, contributing
a significant share in the country's industrial output and export earnings!^ Also, this
labor-intensive sector provides employment to more tlian 30 million people. Many studies
predict tliat India and China will gain a significant share of the world textiles and clothing
trade due to the availability of cheap labor and other factor resources. This paper analyzes
the comparative advantage of India and China for the garment sector, in the export trade.
It uses Balassa's (1965) Index of Revealed Comparative Advantage (RCA) for analyzing
the export data. Also, this paper highlights the shift in the comparative advantage for India
and China between 1995 and 2003. Further, it points out certain constraints restricting the
growth of export share of India in the world market, offering suggestions for policy makers to
boost the export share in world garment trade.

INTRODUCTION
The Indian garment industry is vital to the
economy of the country. It is the largest
employer after agriculture, providing
means of livelihood to over 34 lakh people
directly. In addition, the industry provides
employment to several workers in ancillary
industries like manufacturing of yarns,
fabrics, accessories and processing.
This industry contributes 6% to the GDP
of the country and earns 12% of valuable
foreign exchange for the country.
The garment industry consumes almost
40% of the total fabric production of the

country. A large segment of the garment

sector comprises a vast domestic market,
while another significant segment caters
to the export market. Apparel constitutes
approximately 45% of the country's total
textiles exports (India in Business, 2007;
and WTO, 2007). '
In the world garment export trade,
India exported garments worth $6.46 bn
in 2003, comprising 2.9% of the world
garment export trade, whereas China's
garment exports reached a total value ot
$52.06 bn in 2003, up by 47.7(o from 1994
(Singh and Kathuria, 2006). China is
expected to become an undisputed leader

Associate Professor, Department of Business Manai;ement, Punjab Agricultural University, Punjab, inJia.
Email: lalit_kathuria@yahoo.cm

A STUDY OF COMPKTrnVENHSS OF THE GARMENT EXPORT SECIORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS .

on the basis of market share. Further,

China's (excluding Hong Kong) share in
world garment export trade increased to
30,6% in 2006, when compared to India's
export share of 3,3% in 2006 (WTO, 2007),
Though India registered a 26% annual
growth in 2005 as compared to 20% for
China in 2005, India could not sustain this
growth rate and slipped to 10% in 2006, as
compared to China's annual growth rate
of 29% in 2006, This is shown in Table 1,

particular time frame. This limit varied

for different countries and products.
From January 1, 2005, the MFA has,
now, been teplaced by the Agreement on
Textiles and Clothing (ATC), From
January 1, 2005, the world trade in textiles
and garments has become totally free
(without quotas) to be integrated into the
World Trade Organization (WTO)
regime. The dismantling of the quota
regime presents both an oppottunity as well

^ Table 1: Share of India and China in World Garrnent Trade, 2006

Countries

Share in World Exports

China (Excluding Hong Kong)

India

Annual Percentage Change

2000

2006

2005

2006

18,2

30,6

20

29

3,1

3,3

26

10

Source: World Trade Oiganization, Inteinationd Trade Smiistics, 2007.

Despite the fact that the garment

industry of India is contributing 12% to the
total exports, the share of India in the world
garment export trade is hovering around
3% in the last decade. Threat from China
is taking terrifying proportions in the light
of the Multi-Fibre Arrangement (MFA)
phase-out. This paper attempts to analyze
the structure of comparative advantage for
India and China for 1995 and 2003 with
the help of Balassa's (1965) Index,
Till January 1, 2005, foreign trade in
the garment industry was conducted on
the basis of MFA, Under MFA, quotas for
importing garments were fixed for various
countries with a view to protect the
domestic textiles and garments industry.
Under the MFA system, garment
exporting countties were assigned a
maximum quantity that could be
exported to these countries during a
Volume 15

as a threat. It is an opportunity as the

export markets will not be restricted
anymore; it is a threat due to the lack of
guarantee of quotas. In the light of the
MFA phase-out, it has become important
to understand the true competitiveness of
the Indian garments export sector, in order
to assess the situation in the post-MFA
phase-out scenario.
Though garment exports have witnessed
high gtowth rates in the last decade as
compared to the other commodity exports
from India, the latter's performance, when
compared to many competing countries, has
not been much encouraging, China,
Bangladesh, Pakistan and Vietnam have
registered higher growth rates as compared
to India, In the pos't-MFA phase-out
scenario, China's exports have surged way
ahead of India, Table 1 highlights the share
ot China and India in the world gamients

45 No, 4

SOLITH ASIAN JOURNAL OF MANAGEMENT

trade in 2000 and 2006. Tbe table also

reveals tbat tbougb tbe annual
percentage cbange in garment exports
from India was 26% in 2005, it decreased
significantly to 10% in 2006, wbereas
Cbina registered 20% and 29% annual
growtbs in 2005 and 2006, respectively.
Tbougb many studies predict tbat
Cbina and India will be tbe frontrunners
in tbe post-MEA pbase-out era, tbe gap
between tbe growtb rates of tbese two
countries is widening at a faster pace.
India may face tougb competition from
low-cost countries seeking to expand tbeir
market sbares. Tbis paper attempts at
analyzing tbe competitiveness of India and
Cbina's exports on tbe basis of Revealed
Comparative Advantage (RCA) analysis,
using Balassa's RCA Index.

To atialyze tbe structural cbange in

comparative advantage for India and
Cbina', from 1995 to 2003; and
To bigbligbt tbe constraints restricting
tbe growtb of export sbare of India in
tbe world garment trade.

REVIEW OE THE EXISTIN

LITERATURE
Many studies bave been conducted using
tbe RCA tecbnique. Tbese studies
attempted to analyze tbe export
competitiveness of different products for
different countries.

Hanif and Sabina (2008) constructed

Balassa's RCA Index for tbe textile sector
of Pakistan. Using tbe ratio of credit
extended to tbe textile sector to tbe total
non-government credit of tbe banking
Tbere are different metbods to measure system Textile Credit Sbare (TTCS), as
export competitiveness. Tbese include proxy for external finance, tbey estimated
Revealed Comparative Advantage (RCA), long-run relationsbips and Error
Market Sbare, Unit Value Realization, and Correction Mecbanisms (ECMs) between
Labor Productivity Indices (Prasad and RCA Index and TCS, wbile controlling
Asbok, 1997). In tbis study, an attempt bas otber determinants of tbe international
been made to analyze tbe competitiveness trade competitiveness of tbe textile sector
of tbe garment sectors of India and Cbina of Pakistan. Tbe results of tbe study
witb tbe help of RCA analysis. RCA Indices suggested tbat recourse to external
bave been calculated and compared for finance bas a strong positive inipact on
garment products falling under the tbe country's textile sector competitiveness,
'knitted' (HS 6101 to HS 6117) and tbe botb in tbe sbort and tbe long run, even
'not knitted' category (HS 6201 to HS 6217), wbile controlling traditional determinants
of competitiveness.
for India and Cbina, from 1995 to 2003.

OBJECTIVES OF THE STUDY

Tbe objectives of tbe study are:
To bigbligbt tbe products baving
comparative advantage on tbe basis
of RCA Indices;
Volume 15

Tbornbill (1988) outlined tbe results

of an empirical study of tbe repealed
comparative advantage of Irish exports
of manufactures during tbe period
1969-1982. Tbe concept of comparative
advantage is central to tbe t'beory of
No. 4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS

international trade. This study involved the

measurement of the evolution over time of
the RCA, of the different sub-sectors
which constitute the Irish manufacturing
industry.
Prasad and Ashok (1997) conducted a
detailed analysis of India's competitiveness
in garment export in the different foreign
markets, making use of harmonized system
data. This study examined India's
competitiveness vis-a vis its competitors,
particularly China and Hong Kong, and
suggested various strategies for India in the
MFA phase-out and post MFA phase-out
periods. Further, this study pointed out that
in the post MFA phase-out period, India's
export growth in the garment sector would
largely depend on its technological capacity
and the capacity to market its products in a
relatively more free trade environment.
Drawing on international trade and
industrial organization theories, Bhavani
and Suresh (2001) identified variables
affecting (a) the export decision function,
i.e., to export or sell in domestic market,
and (b) the export performance function,
i.e., the share of exports in output. These
functions were estimated for garment and
apparel producing units in Delhi.
The form of business organization,
reflecting access to capital, turned out to
be a key determinant in both functions.
The estimated marginal impact of
identified variables (scale and share of
sales expenses), on the probability of
exporting in an estimated Probit model,
declines sharply when moving from single
proprietorship to partnership, and on to
limited companies. Empirical results
suggested two policy changes to boost
Volumt 15

export performance. First, given the

importance of scale for exports, the
existing policy of reserving garments and
apparel for exclusive production in
small-scale units needs to be scrapped.
Simultaneously, it also advocated the need
to amend current labor legislation
applicable to large-scale factory units, as
it introduces labor market inflexibility,
and hence, serves as an impediment to
the expansion of existing units and to the
entry of new units.
Utkulu and Seymen (2004) analyzed
the competitiveness and pattern of trade
flows/trade specialization from Turkey to
the European Union (EU), on sectoral
levels, for the period 1990-2003. This study
used the RCA measures in addition to the
Balassa Index, and pointed out that
Turkey has RCA in vegetables and fruits,
sugar, sugar preparations and honey,
tobacco, oil seeds, rubber manufactures,
textiles yarn, fabrics and related products,
clothing and related accessories.
Batra and Zeba (2005) investigated RCA
for India and China, using Balassa's Index,
for export data up to two digit levels (FiS
classification). They also measured
comparative advantage using factor intensity
measures up to three digit levels (Standard
International Trade Classification, SITC).
This study pointed out that the pattern of
comparative advantage varies at different
levels of commodity disaggregation. In case
of India, no other sector except cotton, that
ranks among the top ten, according to the
value of RCA Index, retains its comparative
advantage at the disaggregated level. Both
India and China enjoy maximum advantage

47 No. 4

SOUTH ASIAN JOURNAL OF MANAGEMENT

in the category of manufactured products,

mainly followed by agriculture and allied
products. India has greater advantage in
agriculture and allied products, whereas
China has greater advantage in
manufactured products.
Leung and Cai (2004) appraised two
approaches commonly used in the
economics literature for comparative
advantage assessmentthe Domestic
Resource Costs (DRC) approach and the
RCA approach. Several aquaculturerelated empirical applications of the DRC
and RCA approaches were reviewed.
Einally, the respective merits and problems
of these two complementary approaches
and how they could be used to provide
policy guidance, were outlined.
Balasubramanyam and Yingqi (2005)
compared the export performance of the
textiles and clothing industries in India
and China using the RCA and the
similarity indices. The results indicated
that China had a much higher share in
world exports of both textiles and clothing,
while India had a comparative advantage
in women's clothing and men's shirts.
They further pointed out that, with the
abolition of the' MEA, China is likely to
gain at the expense of India, in most items
of exports of clothing, even in categories
where India has a higher market share
than China. India would have to improve
its competitive strengths in the export
markets vis--vis China, especially so in
high value design-oriented products, in
the EU and the US markets.
Abidin and Loke (2008) opined that the
competitiveness of Malaysian nianufactured
Volume 15

exports can be improved by examining the

pattem of RCA. They further highlighted
that within the non-resource-based
manufactured exports, Malaysia still has a
comparative advantage for electrical and
electronic ' goods and machinery
(its largest export item), even though it
has been on a decline. Malaysia's export
strength has also gradually shifted from
non-resource-based to resource-based
manufactured exports. The RCA
estimates also suggested that trade
liberalization must not only Iower or
eliminate tariffs on final products, but also
reduce import duties, if exports were to
increase their competitiveness!
Li (2008) examined the connection
between' international trade and Foreign
Direct Investment (EDI) by assessing some
salient features of China and EU's market
structures and their current patterns of the
RCA, and how their two-way investments
are related to the changes in the
comparative advantage and trade between
China and EU. They pointed out that the
ELI firms venturing in China played an
impiutant role in the changing patterns of
China's comparative advantage^, and that
an increasing similarity of trade structure
and decreasing complementarity of the
Chinese and EU economies limit the
absorptive capacity of each other's
products, which further challenges China's
entrepreneurs to a high commitment of
direct investment into EU.
Yeats (1990) conducted several
empirical tests for developing countries'
exports of manufactured products, partly
to identify factors that ofte.n lead tcj
differences between the Beln Balassa's

48 No. 4

A STUDY OF COMPETITIVENHSS OF THH GARMENT EXPORT SK( :T(.)RS O INDIA AND CHINA:
) COMPARATIVE ADVANTA(i (R(:A) ANALYSIS

RCA Index and the indices associated

with the National Bureau of Economic
Research
(NBER). f h e
results
highlighted that products in which
developing countries have achieved RCA
are highly concentrated in a broad group of
labor-intensive products; for other items,
their RCA Indices are generally below unity.
.Within the labor-intensive group, however,
developing countries failed to develop RCA
for about half of the items. A regression
model suggested that in the labor-intensive
group, RCA falls as the required increase
for natural resources, for physical capital,
and for human capitalincluding higher
per capita wages, and more professional or
technical personnel.

comparative advantage. Eor example,

Batra and Zeba (2005) analyzed the RCA
for the garment export sector using
Balassa's Index, up to two digits, i.e., HS
61 and HS 62. The present study analyzes
the pattern of comparative advantage up
to four digits, i.e., for products under HS
6101 to HS 6117 and HS 6201 to HS 6217
for India and China, thus highlighting the
specific products having RCA tags under
the 'knitted' and 'not knitted' categories.
This paper attempts to identify products
having comparative advantage so that
garment exporters and policy makers can
pursue the export promotion policies
aggressively in order to garner higher
share in these products having RCA.

Havrila and Gunawardana (2003)

analyzed Australia's comparative advantage
and competitiveness in the Textile and
Clothing (TAC) industries, using Balassa's
RCA Index and VoUrath's measures of
competitiveness. The analysis based on
Balassa's Indices pointed out that Australia
had a strong comparative disadvantage in
textiles and clothing as aggregate commodity
groups, but there is comparative advantage
in sub-categories of special textile prducts,
floor coverage, tapestry, andftirclothing. The
analysis based on VoUrath's Indices shows that
Australia is not competitive in the world
market with respect to aggregate commodity
groups of textiles and clothing. The GrubelLoyd Index of intra-industry trade was
calculated for seven categories of textiles and
two categories of clothing.

RESEARCH METHODOLOGY

Review of the existing literature shows

that these studies fail to point out specific
garment products where India has
Volume 15

In this paper, Balassa's (1965) measure of

relative export performance by country
and industry/commodity, is defined as a
country's share of world exports of a
commodity, divided by its share of total
world exports. The index for country 'i'
and commodity 'f is calculated as follows:
RCA= QipCJ/Q(/XJ... Balassa's Index
where
X. = '''country's export of con"unodityj;
X ^.= world exports of commodity j ;
X, = total exports of country /; and
X = total world exports.
The index can be calculated either for
a specific market or for the whole world,
and is measured using post-trade data.
RCA Indices have been calculated for
various product categories (under the

49 No. 4

SOUTH ASIAN JOURNAL OF MANAGEMENT

harmonized system) of Indian garment

exports, and compared with the RCA
Indices of China, If RCA is greater than
one, it means that the country has a
comparative advantage; similarly, if RCA
is less than one, it means that the country
has a comparative disadvantage.
For calculation of RCA, the export data
has been taken from UN Comtrade, an
electronic database of United Nations
and WTO, These databases contain
detailed information on India's trade as
well as world trade,

RESULTS AND DISCUSSION

This study analyzes the RCA at the 4-digit
level of HS classification of garment
exports for India and China for the period
1995-2003, The analysis reveals the
products in which India and China are
having RCA in garment exports,
structural changes during the different
years, i,e,, 1995 and 2003, and the
competition between India and China in
garment exports, RCA Index has been
calculated with export data for India and
China, and the export data has been
taken from UN Comtrade,

RCA FOR INDIA AND CHINA

(1995)
In the year 1995, India had comparative
advantage in 23 out of 34 products at
4'digit level in HS code 61 and 62, taken
collectively. Considered separately, India
had comparative advantage in 12 products
in HS code 61 (apparel and clothing
accessories, knitted or crocheted), out o
17, at 4-digit level, and 11 products in
HS code 62 (apparel and clothing
Volume 15

accessories, not knitted or crocheted),

out of 17, Percentage-wise, India enjoyed
comparative advantage in approximately
68% of the total exports in FIS code 61
and 62 collectively, in 1995, Men's or
boys' shirts, knitted or crocheted
(6105) enjoyed maximum comparative
advantage, whereas under HS code 62,
women's or girls' blouses, skirts and shirtblouse^s (6206) had the maximum
comparative advantage.
In 1995, China had comparative
advantage in all the 34 products under
HS code 61 and 62, taken collectively.
Under HS code 61, gloves, mittens and
mitts, ' knitted or crocheted (6116)
enjoyed maximum comparative advantage,
whereas under HS code 62, handkerchiefs
(6213) j held the maximum comparative
advantage,

RCA FOR INDIA AND CHINA

(2003)
In the year 2003, India held comparative
advantage in 25 products out of 34, under
HS code 61- and 62, measured
collectively. Under HS code 61, India
held comparative advantage in 13
produc|ts out of 17, whereas under HS
code, I India enjoyed comparative
advantage in 12 products out of 17, at
4-digit level. Men's or boys' overcoats, car
coats, jcapes, cloaks, anoraks, windcheatejs, wind-jackets and similar
articles, knitted or crocheted (6101)
enjoyed the maximum^advantage in HS
code 61, while shawls, scarves, mufflers,
mantillas, veils and similar articles (6214)
had maximum comparative advantage in
HS co|de 62, Measured collectively.

50 No, 4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS

India bad comparative advantage in

approximately 74% of tbe total garment
exports. Cbina, in 2003, bad comparative
advantage in 32 products out of 34, taken
collectively under HS code 61 and 62. In
HS code 61, men's or boys' suits, ensembles,
jackets, blazers, trousers, bibs and brace ^
overalls, breecbes and sborts (otber tban
swimwear), knitted or crocbeted (6103)
held tbe maximum advantage, wbereas
under HS code 62, bandkercbiefs (6213)
retained tbe maximum comparative
advantage. Tbe analysis reveals tbat in
1995, as well as in 2003, Cbina bad
comparative advantage in more number of
products, as compared to India, tbougb tbe
number of products for wbicb India enjoyed
tbe comparative advantage bad increased
from 23 products to 25, between 1995 and
2003; for Cbina, tbis number decreased from
34 products to 32, between 1995 and 2003.
In 1995, under HS 61, India bad
bighest comparative advantage in men's
or boys' sbirts, knitted or crocbeted (6105)
and RCA Index for tbis product was
20.33, followed by women's or girls'
overcoats, car coats, capes, cloaks,
anoraks and similar articles, knitted or
crocbeted (6102), baving a RCA Index
of 4.76. Under HS 62, women's or girls'
blouses, skirts and sbirt-blouses (6206)
enjoyed tbe maximum comparative

advantage witb RCA Index of 16.36, ,

followed by sbawls, scarves, mufflers,
mantillas, veils and similar articles (6214),
baving RCA Index of 15.35. In 2003, under
HS 61, men's or boys' overcoats, car coats,
capes, cloaks, anoraks, wind-cbeaters,
wind-jackets and similar articles, knitted
or crocbeted (6101), bad tbe maximum
advantage witb RCA Index of 13.68,
followed by men's or boys' sbirts, knitted or
crocbeted (6105) witb RCA Index of 12.42.
Under HS 62, sbawls, scarves, mufflers,
mantillas, veils and similar articles (6214)
topped tbe list witb RCA Index of 20.56,
followed by women's or girls' blouses, skirts
and sbirt-blouses (6206) witb RCA Index
ofl4.19.
Tables 2 to 7 provide information
regarding tbe number of products and
detailed description of products in wbicb
India and Cbina are baving comparative
advantage under HS 61 and HS 62.
India gained advantage in more number
of products in 2003 wben compared to
1995. In 2003, India bad comparative
advantage in 6101,6105,6107,6109,6106,
6111 and 6102. Tbe number of products
wbere India bad advantage was two in
1995, wbicb increased to seven in 2003,
wbereas China lost its comparative
advantage in some of tbe products in 2003

Table 2: Total Number of Products for Whicb India Holds Advantage

1995 2003
Product Description
HS Code
61

Apparel and Clothing Accessories, Knitted

or Crocheted

12

13

62

Apparel and Clothing Accessories, Not Knitted

or Crocheted

11

12

Source: UN Comtrade data, Author's Calculations.

Volume 15

51 Nl.4

SOUTH ASIAN JOURNAL OF MANAGEMENT

Table 3: Total Number of Products for Which China Holds Advantage

HS Gode

Product Description

1995

2003

61

Apparel and Clothing Accessories, Knitted

or Crocheted

15

62

Apparel and Clothing Accessories, Not Knitted

or Crocheted

17

Source: UN Comlrade data, Author's Cdculiitions.

Table 4: Comparison of RCA for India and China (1995) HS 61Apparel and
Clothing Accessories, Knitted or Crocheted
:
HS Code
hidia's
Advantage
(No. of
Products: 02)

6105
6106
6102

6107
6103

China's
Advantage
(No. of
Products.- 15)

Product Description
Men's or boys' shirts, knitted or crocheted
Women's or girls', blouses, skirts and shirt-blouses, knitted r croclieted
Women's or girls' overcoats, car coats, capes, cloaks, anorak;s (including
ski-jackets, wind-cheaters, wind-jackets) and similar articles, knitted
or crocheted, other than those under heading 6104
Men's or boys' underpants, briefs, night-shirts, pyjamas,' bathrobes,
dressing gowns and similar articles, knitted or crocheted
Men's or boys' suits, ensembles, jackets, blazers, trousers, biBs and brace
overalls, breeches and shorts (other than swimwear), knitted r crocheted

6108

Women's or girls' slips, petticoat's, briefs, panties, night-dressb, pyjamas,

negligees, bathrobes, dressing gowns, and similar articles; knitted or
crocheted

6111

Babies' gamients and clothing accessories, knitted or crocheted

6104

Women's or girls' suits, enseriibles, jackets, blazers, dresses, shirts,,

dividend skirts trousers, bibs and brace overalls, breeches'and shorts
(other than swimwear), knitted or crocheted
i
-shirts, singlets and other vests, knitted or crocheted

6109
6117
6114
6110

Other made-up clothing accessories, knitted or crocheted; knitted or

crocheted parts of gamients or of clothing accessories
I
Other gamients, knitted or crocheted
Jerseys, pullovers, cardigans, waistcoats and similar articles! knitted or
crocheted
I

6116
6112
6101

Gloves, mittens and mitts, knitted or crocheted

Track suits, ski suits and swimwear, knitted or crocheted
Men's or boys' overcoats, car coats, capes, cloaks, anoraks (including
ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted
or crocheted, other than those under heading 6103

6113

Garments, made up of knitted or crocheted fabrics under headings

5903,5906 or 590?
I

6115-

Panty hose, tights, stockings, socks and other hosiery,including

stockings for varicose s-eins and footwear without applied soles, knitted
or crocheted
Source: UN Comtrade data, Autlxnr's Calculations.
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52 N'[o. 4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS

Table 5: Comparison of RCA for India and China (2003) HS 61Apparel and
Clothing Accessories, Knitted or Crocheted
Product Description

HS Code

India's
Advantage
(No. of
Products: 07)

6101

Men's or boys' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, knitted
or crocheted, other than those under heading 6103

6105

Men's or boys' shirts, knitted or crocheted

6107

Men's or boys' underpants, briefs, night-shirts, pyjamas, bathrobes,

dressing gowns and similar articles, knitted or crocheted

6109

T-shirts, singlets and other vests, knitted or crocheted

6106

Women's or girls' blouses, skirts and shirt-blouses, knitted or crocheted

' 6111
6102

Women's or girls' overcoats, car-coats, capes, cloaks, anoraks (including

ski-jackets, wind-cheaters, wind-jackets) and similar articles, knitted
or crocheted, other than those under heading 6104

6108

Women's or girls' slips, petticoats, briefs, panties, night-dresses, pyjamas,

negligees, bathrobes, dressing gowns and similar articles, knitted or
crocheted

6103

Men's or boys' suits, ensembles, jackets, blazers, trousers, bibs and

brace overalls, breeches and shorts (otlier than swimwear), knitted or
crocheted

6104

Women's or girls' suits, ensembles, jackets, blazers, dresses, shirts,

dividend skirts trousers, bib and brace overalls, breeches and shorts
(other than swimwear), knitted or crocheted

6117

Other made up clothing accessories, knitted or crocheted; knitted or

crocheted parts of garments or of clothing accessories

6112

Track suits, ski suits and swimwear, knitted or crocheted

6114

Other garments, knitted or crocheted

China's
Advantage
(No. of
Products: 10)

Babies garments and clothing accessories, knitted or crocheted

Source: UN Comlrade data. Auihor's Cdailations.

Table 6: Comparison of RCA for India and China (1995) HS 62Apparel and
Clotbing Accessories, Not Knitted or Crocheted
Product Description

HS Code
India's
Advantage
(No. of
Products: 04)

6206

Women's or girls' blouses, skirts and shirt-blouses

6214

Shawls, scarves, mufflers, mantillas, veils and the like

6205

Men's or boys' shirts

6204

Women's or girls' suits, jacket, dress, skirt, etc., woven

Volume 15

53 No. 4

SOUTH ASIAN JOURNAL OF MANAGEMENT

Table 6: Comparison of RCA for India and China (1995) HS 62~Apparel and
Clothing Accessories, Not Knitted or Crocheted
(...contd
HS Code
Handkerchiefs

6208

Women's or girls' singlets and other vests, slips, petticoats, briefs, panties,
nightdresses, pyjamas, negligees, bathrobes, dressing gowns'and similar
articles

6207

Men's or boys' singlets and other vests, underpants, briefs, nightshirts,

pyjamas, bathrobes, dressing gowns and similar articles |

6209

Babies' garments and clothing;accessories

6211

Track suits, ski-suits and swimwear; other garments

6203

Men's or boys' suits, ensembles, jackets, blazers, trousers, bibis and brace
overalls, breeches and shorts (other than swimwear) 6210
Garments, made up of fabrics under headings 5602, 5603, 5903 5906
or 5907
:

6216

Gloves, mittens and mitts

6201

Men's or boys' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, other
than those under heading 6203

6202

Women's or girls' overcoats, car coats, capes, cloaks, anoraks (including

ski.jackets), wind-cheaters, wind-jackets and similar articles, other
than those under heading 6204
j

6212

Brassieres, girdles, corsets, braces, suspenders, garters and sim|ilar articles

and parts thereof, whether or not knitted or crocheted

6217

Other made up clothing accessories; parts of garments or f clothing

accessories, other than those under heading 6212

6215

Ties, bow ties and cravats

China's
Advantage
(No. of
Products: 13)

Product Description

6213

Source: UN Comtrade data, Author's Calculations.

Table 7: Conaparison of RCA for India and China (2003) HS 62Apparel and
Clothing Accessories, Not Knitted or Crocheted
HS Code
hidia's
Advantage
(No. of
Products: 05)

Product Description

6214

Shawls, scarves, mufflers, mantillas, veils and the like

6206

Women's or girls' blouses, skirts and shirt-blouses.

6205

Men's or boys' shirts

6208

Women's girls' singlets and other vests, slips, petticoats, briefs, panties,
nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar
articles

6209

Babies' garments and clothing accessories

(Contd...)
Volume 15

54 No. 4

A STUDY OF COMPETITIVENESS OF THE (3ARMENT EXPORT SECTORS OF INDIA AND CHINA;

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS

Table 7: Comparison of RCA for India and China (2003) HS 62Apparel and
Clothing Accessories, Not-Knitted or Crocheted
(,..contd)
Product Description

HS Code

China's
Advantage
(No, of
Products: 12)

6207

Men's or boys' singlets and other vests, underpants, briefs, nightshirts,

pyjamas, bathrobes, dressing gowns and similar articles

6213

Handkerchiefs

6204

Women's or girls' suits, jacket, dress, skirt, e t c , woven

6203

Men's or boys' suits, ensembles, jackets, blazers, trousers, bibs and brace
overalls, breeches and shorts (other than swimwear) 6211 Track suits,
ski-suits and swimwear; other garments

6216

Gloves, mittens and mitts

6201

Men's or boys' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, other
than those under heading 6203

6202

Women's or girls' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, other
than those under heading 6204

6210

Garments, made up of fabrics under headings 5602, 5603, 5903, 5906

or 5907

6215

Ties, bow ties and cravats

6212

Brassieres, girdles, corsets, braces, suspenders, garters and similar articles

and parts thereof, whether or not knitted or crocheted

6217

Other made up clothing accessories; parts of garments or of clothing

accessories, other than those of heading 6212
Source: UN Comlrade data, Auilxor's Calculalions.

as compared to 1995, The number of

products, in case of China, decreased
from 15 to 10,
Whereas for HS 62, India had not
been able to increase much of its share
in garment exports on the basis of
comparative advantage in 2003, as
compared to 1995, In 1995, India had
comparative advantage in four products,
while in 2003, tbis situation improved
marginally as India bad comparative
advantage in five products.

CHANGES IN RCA (1995-2003)

Furtber, Spearman Rank Correlation
Coefficient (SRC) bad been calculated
for analyzing tbe cbanges over tbe period
1995-2003 for India and Cbina, In tbe
present study, a bigb rank correlation
coefficient means tbat tbe ranking of tbe
country's products on tbe basis of
comparative advantage bas not cbanged
mucb over tbe selected time period, wbile
a low correlation coefficient means tbe
opposite.

Volume IS C C No, 4

Si,)UTH ASIAN JOURNAL OF MANACiBMJ-NJ

products in comparison to woven products,

as India' bad been able to increase its
comparative advantage in seven products
from two, for tbe HS 61 category. Tbougb
India bad comparative advantage in 13
products! in tbe 'knitted' category and 12
products !in tbe 'not knitted' category, wben
compared to Cbina, India bad corriparative
advantage in lesser number of products.

Table 8 indicates tbat SRC for India is

0.67 .and 0.92 for HS 61 and HS 62
respectively, indicating a little cbange in
tbe rankings on comparative advantage,
over tbe period 1995-2003. Similarly,
Table 9 indicates no major cbange in
tbe rankings for Cbina over tbe period
1995-2003, as SRCs for HS 61 and HS 62
are 0.60 and 0.72 respectively.

Table 8: Spearman Rank Correlation Coefficient ! (SRC) for India (1995-2003)

HS Code
61
62

SRC

Product Description

Apparel and Clothing Accessories, Knitted

or Crocheted

0.67

Apparel and Clothing Accessories, Not Knitted

or CrochetedO.92

Table 9: Spearman Rank Correlation Coefficient (SRC) for Cbina (19 5-2003)
HS Code
61

62

SRC

Product Description
Apparel and Clothing Accessories, Knitted
or Crocheted

0.60

Apparel and Clothing Accessories, Not Knitted

or Crocheted

0.72

Table 10: Spearman Rank Correlation Coefficients (SRCs) for India ar d Cbina
HS Code
61
62

1995

2003

Apparel and Clothing Accessories, Knitted

or Crocheted

0.08

(-) 0.14

Apparel and Clothing Accessories, Not Knitted

or Crocheted
|

0.10

(-) 0.03

Product Description

Table 10 reveals tbat SRCs for India

and Cbina for tbe year 1995 and 2003,
in respect of HS 61, are 0.08 and -0.14.
Similarly, SRCs for HS 62 are 0.10 and
-0.03. Tbe low coefficients imply tbat
India and Cbina were competing with
eacb otber for various products in tbe
world garment export trade.
Tbe paper bigbligbts tbat India had
bigber comparative advantage in knitted
Volume 15

Under tbe HS 62 category, India' bad been

able to. improve marginally, on tbe
basis of 'comparative advantage, wbereas
Cbina bad comparative advantage in 12
products in 2003. Not mucb structural cbange
was noticed for India and Cbina for tbe period
1995-203. Tbe analysis, furtber, r;veals tbat
India and Cbina bad been competing for
garment exports at tbe world level and tbat
India bad captured comparative advantage

56 ^

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTOR.S OF INIMA AND CHINA: /

REVEALED CX^MPARATIVE ADVANTA(5E (RCA) ANALYSIS
,'

from 0.72% in 1995. Similar is the case

with product category 6214, where the
RCA Index moved up to 20.56 in 2003
from 15.35, hut its share in the country's
total garment export increased from 3.36%
in 1995 to 3.95% in 2003. Also, the
analysis reveals that more than 75% of the
total garment export share of India was
concentrated in 15-16 items of total 34
(Tables 11 and 12).

from Cliina in some of the products in 2003,

when compared to 1995.

INDIA'S RCA AND EXPORT

SHARE
The analysis reveals that for HS 6101
products, India had a much higher RCA
of .13.68 in 2003, hut its share in the
country's total clothing exports was only
1.13% in 2O3. Similarlyr for HS 6102,
though the RCA Index was 4.23, its share
in the coimtry's total clothing exports was
only 0.41%. Similarly, for HS 6208, the
RCA Index increased from 5.74 in 1995
to 9.26 in 2003, hut its share in India's
total garment exports increased only from
1.99% to 2.63%. Also, for 6209, the RCA
Index increased from 4.92 to 7.28, but the
share of this in India's total garment export
managed to move up only to 1.49% in 2003

CONSTRAINTS AND POLICY

IMPLICATIONS
India has not heen able to garner higher
share in world clothing exports due to
several constraints, whereas China has
pursued its export promotion policies
aggressively. The structure of the clothing
industry in India is a major constraint.
Majority of the firms in India's clothing sector

Table 11: RCA and Export ShareIndia 61 (1995 and 2003)

2003

1995
Product
Code

RCA Index

Share of Each
Item in India's
Total Clothing
Exports

6101

.58

0.02

13.68

1.13
0.41

RCA Index

Share of Each
Item in India's
Total Clothing
Exports

6102

4.76

0.15

4.23

6103

3.58

1.01

3.02

1.65

6104

2.08

1.76

2.23

2.51

6105

20.33

10.64

12.42 .

6.69

6106

3.84

1.87

5.55

3.80

6107

4.14

1.13

8.23

2.94

6108

2.78

1.75

4.25

3.62

6109

2.06

3.17

6.64

15.68

6111

2.56

0.74

4.83

2.07

6112

0.41,

0.11

1.25

0.41

6114

1.82

0.38

1.09

0.34

1.34

0.15

6117

1.34
Source: UN Comtrade dala. Author's Calculations.
Volume 15

57 No. 4

0.35

SOUTH ASIAN JOURNAL OF MANAGEMENT

Table 12: RCA and Export ShareIndia 62 (1995 and 2003)

2003

1995

RCA Index

Share of Each
Item in India's
Total Clothing
Exports'

RCA Index

Shar e of Each
Item in India's
Tota Clothing
Exports

6201

0.43

0.32

1.35

0.91

6203

1.25

3.91

1.96

: 6.16

6204

6.07

21.53

3.41

14.96

6205

14.58

20.48

9.85

11.67

6206

16.36

18.04

14.19

13.68

6207

4.92

0.77

4.99

0.73

6208

5.74

1.99

9.26

2.63

6209

4.92

0.72

7.28

1.49

6211

1.35

1.05

1.48

1.22

6213

6.04

0.18

4.91

0.09

6214

15.35

3.36

20.56

3.95

6216

0.86

0.05

1.48

0.08

Product
Code

Source: UN Comltade data. AuOwr's Calculaiicns.

are small firms. Also, Indian exporters

operate on small scale in order to avoid the
labor regulations. Due to tbe
small-scale operations, manufacturerexporters are not able to gain tbe advantage
of economies-of-scaie (USITC, 2004).
Tbough India bas some advantage in tbe
form of lower labor cost, as compared to
Cbina, tbis labor cost advantage is
counterbalanced by tbe increasing cost of
power, fuel and interest payments.
Tbe montbly wage of a manufacturing"
worker in Cbina is $110.80, wbile it is only
$23.80 in India. (Kalisb, 2006, cited in
Quresbi and Wan, 2008). Pakistan bas lower
labor cost tban India (Rangarajan, 2005).
Otber factors like better infrastructure,
flexible labor markets and favorable

investment environment bave pjlayed a key

role in tbe growtb of export sbai^e of Cbina
(Abya et al, 2004, cited in Quresbi and
Wan, 2008).
Also, tbe sbare of direc^t labor in
production cost bad come dowii from 30%
in conventional production lines to 3% in
tbe new automated lines (Business Line,
2002). Otber important constraints in tbe
growtb of India's clotbing export were
bigber transaction costs, bureaucratic
bardies, low labor productivity, slow rate of
tecbnology upgradation and poor
infrastructure. Cbina bad more tban 10%
cost advantage wbile exporting clotbing
items to tbe US. India's delivery time
(transit time only) to tbe US is!24 days, as
compared to 12-15 days for Cbina (Winters

1 s 58 No. 4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RC) ANALYSIS

and Mehta, 2003). Technological level in

garment manufacturing is relatively low in
India. A World Bank study in 1998 found
that average investment per machine in a
garment manufacturing unit was just $250
as compared to $ 1,500 in China and $ 1,260
in Thailand. Due to the low level of
technology, a Hong Kong manufacturer
makes 20.6 blouses per day per machine
while the Indian average is just 10.2
(Business World, 2003). Another important
point highlighted hy Ramaswamy and
Gereffi (2000) is that Indian garment exports
are predominantly cotton fibre-hased, and
also, garment exports are concentrated in
only a few items. Also, the US and EU are
two major markets for Indian garment
exporters. The US alone accounts for
approximately 29% of India's total gamient
exports in 2007-2008 (Ministry of
Commerce, 2007-2008).
Cost reduction across the value chain,
through strategic collaboration between
all the links in the value chaincotton
growers, yarn manufacturers, fabric
manufacturers, fabric processors, garments
manufacturers, garment processors,
accessories' suppliers and buyersshould
be the objective ofthe garment exporters.
Asian countries can form a formidable
supply chain for gaining several
advantages like setting up of garment
factories at cheaper locations, importing
yarn and fabrics based on each country's
strengths, product mix diversification,
marketing of value-added garments, and
influencing policy making through joint
cooperation. High cost of power, poor rail
and road system, and lack of adequate
facilities at the portall increase the
transaction costs of the garment
Volume 15

exporters. The Government of India

should take immediate steps to improve
the existing infrastructure. There is an
urgent need of technological upgradation
on the part of garment exporters.
Investment in manufacturing facilities and
modernization will be the key factors for
success in the post MFA phase-out
scenario. Indian exporters have to
promote export of garments in the global
market through increased product
differentiation and improved quality and
design. A large share of our total garment
exports is concentrated in the US, EU and
Canadian markets. The need is not only
to broaden the product portfolio with
economies of scale, but also to intensify
efforts to enter newer markets of Brazil
and Peru in South America, Russia, West
Indies, and Northern European countries
like Norway, Sweden, Switzerland and
Einland, in a big way. Garment exporters
need to diversify into other markets like
Australia, New Zealand, South Africa,
Japan and Middle East countries.
Exporters need to reduce the product
development cycle time by using various
information technology tools (Kathuria
and Raghbir, 2005). It will not be easy for
Indian exporters when its garment
industry is pitched against the best. In the
era of open markets, many small-scale
units may be wiped out. A quota-free
market may throw up both a challenge
and an opportunity for Indian garment
exports. In a quota-free international
market, some countries will have to
vacate some of their shares because of high
and increasing production costs, and
India would need to quickly cash in on
these emerging opportunities.

59 No. 4

ASIAN JOURNAL OF MANA(EMENT'

7 Business Line (2002), "Labour Costs

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5, Batra A and Zeba Kban (2005), 13, Leung P and Cai J (2004), "Linkage
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between Cbina and EU", Inteniational
6, Bbavani T A and Suresb Tendulkar
Joumal of Trade ajid Global Markets,
D (2001), "Determinants of FirmVol, l,No, 3, pp, 223-238:
Level Export Performance: A Case 15, Ministry of Commerce (2007-08),
Study of Indian Textile Carments and
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60 N'

0,4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SECTORS OF INDIA AND CHINA:

REVEALED COMPARyVUVE ADVANTAGE (RCA) ANALYSIS

16. Prasad H and Ashok Chandra (1997),

"India's Competitiveness in Export of
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Potential and Trade and Investment

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23. United States International Trade
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18. Ramaswamy K V and Gary Gereffi

. (2000), "India's Apparel Exports:
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24. Utkulu U and Dilek Seymen (2004),

"Revealed Comparative' Advantage
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No. 2, pp. 186-210.

19. Rangarajan K (2005), "International
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20. Singh R and Kathuria L M (2006),
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32. http://www.wto.org/english/res_e/
statis e/its2OO7 e/itsO7 toe e.htm

No. 4

SOUTH ASIAN JOURNAL OF MANAGEMENT

APPENDIX
Table 1 : HS Code and Product DescriptionApparel and Clothing
Accessories, Knitted or Crocheted (61)
SI. No.

Product Description

HS Code
6101

Men's or boys' overcoats, car coats, capes, cloaks, anoraks .(including

ski-jackets), wind-cheaters, wind-jackets and similar articles,.knitted or
crocheted, other than those under heading 6103

6102

Women's or girls' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets, wind-cheaters, wind-jackets) and similar articles, knitted or
crocheted, other than those under heading 6104

6103

Men's or boys' suits, ensembles, jackets, blazers, trousers, bibs and brace
overalls, breeches and shorts (other than swimwear), knitted or
crocheted

6104

Women's or girls' suits, ensembles, jackets, blazers, dresses, shirts, dividend

skirts trousers, bibs and brace overalls, breeches and shorts (ther than
swimwear), knitted or crocheted

6105

Men's or boys' shirts, knitted or crocheted

6106

Women's or girls' blouses, skirts and shirt-blouses, knitted or crocheted

6107

Men's or boys' underpants, briefs, night-shirts, p>'jamas, bathrobes, dressing

gowns and similar articles, knitted or crocheted

6108

Women's or girls' slips, petticoats, briefs, panties, night-dresses, pyjamas,

negligees, bathrobes, dressing gowns and similar articles, k'l'tted or
crocheted

9,

6109

T-shirts, singlets and other vests, knitted or crocheted

10,

6110

Jersey's, pullovers, cardigans, waistcoats and similar articles, knitted or

crocheted

11,

6111

Babies' garments and clothing accessories, knitted or crocheted

12,

6112

Track suits, ski suits and swimwear, knitted or crocheted

13,

6113

Garments, made up of knitted or crocheted fabrics under headings

59,03,59,06 or 59,07,
' '

14,

6114

Other garments, knitted or crocheted

15,

6115

Panty hose, tights, stockings, socks and other hosiery, including stockings
for varicose veins and footwear without applied soles, knitted or
crocheted

16,

6116

Gioves, mittens and mitts, knitted or crocheted

17,

6117

Other made up clothing accessories, knitted or crocheted; knitted or

crocheted parts of garments or of clothing accessories
i

2,

5,

Volume 15

62 No, 4

A STUDY OF COMPETITIVENESS OF THE GARMENT EXPORT SEOTORS OF INDIA AND CHINA:

REVEALED COMPARATIVE ADVANTAGE (RCA) ANALYSIS

Table 2: HS Code and Product DescriptionApparel and Clothing Accessories,

Not Knitted or Crocheted (61)
SI. No.

HS .Code

Product Description

1.

6201

Men's or boys' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, other than
those under heading 6203

2.

6202

Women's or girls' overcoats, car coats, capes, cloaks, anoraks (including

ski-jackets), wind-cheaters, wind-jackets and similar articles, other than
those under heading 6204

3.

6203

Men's or boys' suits, ensembles, jackets, blazers, trousers, bibs and brace
overalls, breeches and shorts (other than swimwear)

4..

6204

Women's or girls' suits, jacket, dress,.skirt, etc., woven

5.

6205

Men's or boys' shirts

6.

6206

Women's or girls' blouses, skirts and shirt-blouses

7.

6207

Men's or boys' singlets and other vests, underpants, briefs, nightshirts,

pyjamas, bathrobes, dressing gowns and similar articles

8.

6208

Women's or girls' singlets and other vests, slips, petticoats, briefs, panties,
nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar
articles

9.

6209

Babies' garments and clothing accessories

10.

6210

Garments, made up of fabrics under headings 5602, 5603, 5903, 5906 or

5907

11.

6211

Track suits, ski-suits and swimwear; other garments

12.

6212

Brassieres, girdles, corsets, braces, suspenders, garters and similar articles

and parts thereof, whether or not knitted or crocheted

13.

6213

Handkerchiefs

14.

6214

Shawls, scarves, mufflers, mantillas, veils and the like

15.

6215

Ties, bow ties and cravats

16.

6216

Gloves, mittens and mitts

17.

6217

Other made up clothing accessories; parts of garments or of clothing

accessories, other than those under heading 6212'

Volume ]5 7

No. 4