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American retailers ramp up queries to India apparel hub

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Heftier US tariffs on China, Bangladesh make India

competitive

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India's Tiruppur textile hub faces worker shortage, higher

costs

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Bangladesh still has advantage on labour rates, larger

factories

By Dhwani Pandya, Praveen Paramasivam, Ruma Paul and Manoj

Kumar

TIRUPPUR, India/DHAKA, Bangladesh, May 9 (Reuters) - In

a garment hub in south India, R.K. Sivasubramaniam is fielding

requests from Walmart ( WMT ) and Costco who want to sidestep higher

U.S. tariffs faced by rival Asian suppliers, Bangladesh and

China. But rows of idle sewing lines at his factory lay bare his

biggest challenge.

"Even if orders come, we need labour. We don't have

sufficient labour," said the managing director of Raft Garments

which supplies underwear and t-shirts priced as low as $1 to

U.S. brands.

Considered India's knitwear capital, Tiruppur city in the

southern state of Tamil Nadu accounts for nearly one-third of

the country's $16 billion in apparel exports, and is staring at

a huge opportunity as U.S. buyers explore ramping up sourcing

from India in the face of heftier tariffs on other Asian hubs.

U.S. President Donald Trump plans to hit India, the world's

sixth largest textile and apparel exporter, with a 26% tariff

from July, below the 37% imposed on Bangladesh, 46% on Vietnam

and 145% on China - all of which are bigger American suppliers.

Those tariffs will make apparel from India much more

competitive with both Bangladesh and China.

But the mood is somber at the Tiruppur textile park as

it faces a reality check: India's hopes of capitalising on its

tariff advantage are hindered by a skilled labour crunch,

limited economies of scale, and high costs.

Raft Garments wants to expand production to tackle new

orders but is importing high-end machines to automate some

stitching processes, given the business for now heavily depends

on migrant labour, which is very tough to find or retain.

Garment exporters in India say workers have to be trained

and many leave within months to work at smaller, unorganised

units that allow longer hours and pay more. The larger

manufacturers can't match them due to foreign clients'

requirements on cost and workers' conditions, according to

Reuters interviews with 10 manufacturers and apparel exporter

trade groups representing 9,000 businesses.

Prime Minister Narendra Modi has for years courted foreign

investors to his "Make in India" programme to turn the South

Asian nation into a global manufacturing hub. A shortage of

skilled workers in a nation where 90% of the labour force

operates in the informal sector is seen as a big roadblock,

especially in labour-intensive sectors like garments.

Tiruppur offers a glimpse of India's labour strain.

"We need at least 100,000 workers," said Kumar Duraiswamy of

the exporters association in Tiruppur, where he said more than 1

million people currently work.

Modi's government last year said it was extending a

programme to specifically train 300,000 people in

textile-related skills, including garment making.

In the textile hub, some have taken matters into their own

hands.

Amid a hum of sewing machines at the Cotton Blossom factory,

which makes 1.2 million garments a month, including for American

sporting goods retailer Bass Pro Shops, Naveen Micheal John said

he has set up three centres thousands of miles away to train and

source migrant workers.

And even then, most return to their home towns after a few

months.

"We skill them there for three months, then they are here

for seven months. Then they return back," John said during a

tour of his garment unit, adding he wants to look at other

states where labour and government incentives both may be

better.

CAPACITY WOES

China's $16.5 billion worth of apparel exports, Vietnam's

$14.9 billion and Bangladesh's $7.3 billion made them the three

biggest suppliers to America in 2024, when India shipped goods

worth $4.7 billion, according to U.S. government data.

U.S. companies have for years been diversifying their supply

chains beyond China amid geopolitical tensions. And even before

the news of tariffs in April, now paused until July,

Bangladesh's garment industry began losing its sheen amid

political turmoil there.

A survey of 30 leading U.S. apparel brands by the United

States Fashion Industry Association showed India had emerged as

the most popular sourcing hub in 2024, with nearly 60% of

respondents planning to expand sourcing from there.

With the tariffs, India's exports would cost $4.31 per

square metre of apparel, compared with $4.24 for Bangladesh and

$4.35 for China, a sharp improvement on India's competitiveness

without the levies, according to Reuters calculations based on

2024 import data from the U.S. Office of Textiles and Apparel.

But it's in the economies of scale where India loses.

Bangladesh Garment Manufacturers and Exporters Association

says an average garment factory there has at least 1,200

workers, whereas in India, according to its Apparel Export

Promotion Council, there are only 600 to 800.

"Bangladesh capacities are huge ... We have issues of

capacity constraint, lack of economy of scale due to smaller

size of factories, labour unavailability during peak seasons,"

said Mithileshwar Thakur of the Indian trade group.

To address those challenges, garment makers have started to

set up factories in states where migrant workers come from, he

said.

In Tiruppur, its exports association says the largest 100

exporters contributed 50% of its $5 billion sales last fiscal

year, with the rest from 2,400 units, a telling sign of the

fragmented and largely smaller-scale operations.

Raft makes 12 million garment pieces a year with a workforce

of just 250 people. A U.S. client is close to placing an order

for 3 million units, which will stretch the factory to its limit

and force it to consider expansion.

"This one order is more than enough for us," said

Sivasubramaniam.

PRICING ROADBLOCK

Data from shipping consultants Ocean Audit showed

Walmart ( WMT ) imported 1,100 containers of household goods and

clothing between April 2 and May 4 from India, nearly double the

same period last year, including cotton shirts and pleated maxi

skirts.

In a statement, Walmart ( WMT ) said it sources from more than 70

countries around the world as it aims to find the right mix of

suppliers and products.

While U.S. retailers are lodging more queries in Tiruppur,

pricing negotiations remain contentious due to higher labour and

other costs.

Indian brokerage Avendus Spark said in March Bangladesh's

cost of labour stood at $139 per month, compared to India's $180

and China's $514.

P. Senthilkumar, a senior partner at India's Vector

Consulting Group, said India had stricter rules for overtime

policies and worker shifts, further raising costs.

In Dhaka, Anwar-ul-Alam Chowdhury of Evince Group said most

of their U.S. buyers were sticking with Bangladesh, given the

"large production capacity, lower costs, and reliable quality

give us a clear edge."

In India, though, Tiruppur exporters said they are in hectic

talks with many U.S. clients who love the Bangladesh cost

advantage and are aggressively bargaining.

At Walmart ( WMT )-supplier Balu Exports, Mahesh Kumar Jegadeesan

said U.S. clients had conveyed "we will not budge on the price"

and were willing to move some orders only if Indian exporters

can match prices.

Inside the nearby Raft Garments factory, where women were

stitching underwear, the smile on managing director

Sivasubramaniam's face sparked by 14 new business inquiries of

recent weeks faded quickly.

"All want us to match Bangladesh prices. Price is a big

problem," he said.