The Role of Technology in Increasing Competitiveness: An Examination of the Indian Garment Clusters
| Author | Saon Ray,Smita Miglani |
| Published date | 01 November 2022 |
| Date | 01 November 2022 |
| DOI | http://doi.org/10.1177/00157325211073848 |
| Subject Matter | Articles |
The Role of Technology
in Increasing
Competitiveness:
An Examination of
the Indian Garment
Clusters
Saon Ray1 and Smita Miglani1
Abstract
In this article, we examine the Indian garment industry to examine the effect
of clusters on the sales of this industry. The data has been collected through a
primary survey in five garments clusters in India. The variable that is significant in
explaining sales in most equations is technology proxied by imported machinery.
It has been argued that inter-firm linkages and linkages between firms, service
providers and institutions are crucial for competitiveness and this is best achieved
through a cluster. Studies on clusters have shown that some clusters have been
able to deepen their inter-firm division of labour, raise their competitiveness and
break into international markets. The development of the cluster in India has fol-
lowed the ‘top-down’ approach and the natural process through which linkages
are developed are yet to occur in most clusters.
JEL Codes: F14, L67, L23
Keywords
Competitiveness, garment, cluster, South Asia
Article
1 Indian Council for Research on International Economic Relations, New Delhi, India.
Corresponding author:
Saon Ray, Indian Council for Research on International Economic Relations, Core 6A, 4th Floor, IHC,
Lodi Road, New Delhi, Delhi 110003, India.
E-mail: sray@icrier.res.in
Foreign Trade Review
57(4) 408–428, 2022
© 2022 Indian Institute of
Foreign Trade
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DOI: 10.1177/00157325211073848
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Ray and Miglani 409
Introduction
The apparel industry was central to the industrialisation process of many devel-
oped countries (like Japan) and the newly industrialising countries (Dickerson,
1999). The short-term effects of engaging in this sector come from employment,
income and foreign exchange while long term effects include export diversifica-
tion. The apparel industry is organised through buyer driven chains (Gereffi &
Memedovic, 2003). In these chains, large retailers, marketers and branded manu-
facturers play the key roles in setting up decentralised production networks in a
variety of exporting countries, which are usually located in developing countries.
Exports in this sector are dominated by developing countries. In 2015, the top 10
exporters of clothing included eight developing countries (China, Bangladesh,
Vietnam, Hong Kong, India, Turkey, Indonesia and Cambodia). However, India
has been losing its share of the world apparel trade; in 2016 it was 3.5%, com-
pared to 6% in 2013.
The literature on global value chains and clusters has led to the discussion on
co-evolution, the nature of internationalisation of activities and the role of lead
firms (De Marchi et al., 2018). At the heart of the discussion is the issue of com-
petitiveness. Firms are continually under pressure to improve competitiveness in
the present world (Humphrey & Schmitz, 2000). The interaction between local
and global clusters in developing countries assumes importance as well as the role
of industrial policy in achieving this objective.
In this article we study the reasons for India’s declining garment exports
through the lens of global value chains. We examine the effect of South Asian
competition on Indian garment industries and conclude that it is negligible. In
this context, we examine the Indian garments industry to examine the effect of
clusters on the sales of this industry. We also argue that the main reason for India’s
poor performance in garments exports is the lack of proper clusters. The natural
process through which linkages are developed are yet to occur in most clusters
studied in this article.
The structure of the article is as follows: in the next section we discuss the lit-
erature with respect to clustering and why it assumes importance in the context of
certain industries. The third section discusses the Indian garments1 industry. The
fourth section sets out the empirical exercise used in this article. The fifth section
presents the results of the empirical exercise. The sixth section concludes with
policy implications.
Literature Survey
The importance of local sources of competitiveness has been emphasised in four
strands of literature (Humphrey & Schmitz, 2000): (a) Business studies; (b) New
economic geography; (c) Innovation studies; and (d) Regional science. The busi-
ness studies literature emphasised the factors that lead to competitiveness.
Competitiveness in exports can be achieved by an increase in productivity.
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