By Krishna N. Das

HINDUPUR (Reuters) – Thousands of women work at Texport Industries’ South India factories, transforming yarn and fabrics into T shirts, shirts and spaghetti tops for U.S. customers like Tommy Hilfiger (NYSE:)

India’s garment factory capacity is now at its full potential after being outpaced over the years by Bangladesh, then further impacted by the COVID-19 outbreak. Prime Minister Narendra Modi along with his ruling party are heading towards an election for 2024.

Parashuram said that “we have been so busy,” while a 60-strong group of women took up stitching. “We’re always on the lookout for skilled workers.”

It is currently looking at land for additional factories in its Hindupur base, located approximately 100 km (60 mi) north of Bengaluru tech hub.

Sustained success for the textile and apparel (T&A) industry, the country’s biggest employer after farming, is crucial if Modi is to succeed in taming unemployment.

India’s current jobless rate exceeds 7%. In fact, it is higher than the global average for five years. This presents an enormous problem to a country that needs to create millions of jobs annually to meet the demands of young people entering the workforce.

HIGHER LABOUR COSTS

India is the world’s fifth biggest T&A exporter with a 4% share of the $840 billion global market, while China controls more than a third of it. India’s exports were comparable to Bangladesh’s about a decade ago, however they have fallen in recent years due to rising labour costs. Indian garments are 20% more costly than Bangladeshi clothes.

Indian T&A companies say they are now adding new clients, selling more to old ones and raising production capacity as foreign buyers seek to diversify their supply chains.

Only India, other than China has an extensive supply chain for everything cotton-to-clothes.

Some industry experts said it was impossible to sell Bangladesh if India did not sign free trade agreements. New Delhi claims it is doing so. Bangladesh also has preferential export terms with many buyers because it is a less developed country.

Indian companies like Texport, Welspun India or Raymond are bought by Western retailers Amazon (NASDAQ). Target In recent quarters, sales have risen at Walmart (NYSE) (NASDAQ:), Costco(NASDAQ:), Walmart/NYSE (NYSE) (OTC) (Inc), Tesco (OTC) (Macy’s) (NYSE)

Modi expects them to create 1.5 million new jobs within the sector in five years.

Darshana Jardosh (India’s junior minister for textiles), listed Wednesday recent announcements for the industry. These included setting up seven large all-in-one fabric parks worth approximately $600 million, which will increase employment, make it easier for foreign buyers and improve supply chain monitoring. In addition, the government proposed $1.4 billion worth of production-linked incentives.

The American Apparel & Footwear Association (AAFA) said India’s ongoing and planned investments had resulted in “more companies looking at India as a potential source of growth over the coming years”, without giving specifics.

Two sources in the industry who are familiar with the situation said that both Fast Retailing’s Uniqlo and Gap Inc – NYSE: – were looking to increase their purchases from India. Companies that source garments from India from Shahi Exports, the largest Indian exporter, didn’t immediately reply to queries for comment.

Harish Ahuja (Managing Director Shahi Exports) declined to speak with individual buyers, but stated there is a high demand for Shahi Exports products from their existing customers.

CAPACITY CONSTRAINTS

India’s April-December T&A exports soared 52% to $30.5 billion from the year-ago period, and the government has set a full fiscal-year target of $44 billion, which would be a record.

According to industry reports, India saw a 0.8% decline in textile exports between 2015-2019. The global textile market experienced a compounded annual rate growth of 2.2% from 2015 through 2019. In Bangladesh, Vietnam and Thailand both grew 10% or more.

It is believed that rights violations occurred in China’s main cotton producing province of Xinjiang. This is where the Uyghur Muslim minority live.

Late December saw the signing into law by President Joe Biden of the United States legislation banning imports from Xinjiang. China denies any claims of forced labour, or any other abuses within Xinjiang.

China Cotton Association referred Reuters a December Statement that warned of “severe consequences” for its cotton textile sector due to the U.S.’s move.

Raymond, an Indian exporter men’s suits jackets and denim for India, stated that China helped them sign new customers recently.

Narendra Goenka (chairman of the Apparel Export Promo Council of India) said that “at current capacity we may not have the ability to pick up as many orders as our customers want, as well as as as many buyers who wish to ship away to China,” and he is also a founder of Texport, a family-owned business.

Goenka stated that his company spent $25 million on capacity increases over the next 2 years. This included the creation of an additional 8,000 job and more than 10,000 new jobs.

Lopamudra, 19, a 19-year old from eastern Odisha who had to rely on her father’s part-time driver income, has found relief in the industry. Lopamudra Patel joined Texport a few months ago to earn a $100 monthly salary.

Standing next to the whirring machines of the sewing room, she stated that it was difficult for her at home. “I am now able to send money back.”