India is rising, not only as a new choice of relocating labour-intensive industries from China, but also as a retail market of good potential, says a research report by The Hong Kong Trade Development Council (HKTDC).

In recent years, the sustained rise in production costs on the Chinese mainland has eroded the profit margins of many Hong Kong companies with labour-intensive factories located on the Chinese mainland, prompting them to seek alternative production bases elsewhere.

While Southeast Asian countries offer many choices, the HKTDC report says India offers many advantages as an alternative production base, along with the added advantage of having a domestic market of great potential.

According to the report, the majority of Indian garment producers are focused on the domestic market, as their product quality was generally lower than the standards required by overseas importers.

Despite this, many big Indian exporters have successfully lined up with international buyers, including department stores, retail chains and brands.

The paper was written after a recent field trip to India that included factory visits and interviews with garment manufacturers.

In the four years to 2014, India’s garment exports increased at an average annual rate of 12 per cent, surpassing China’s 9 per cent, in line with Bangladesh’s 13 per cent and eclipsed by Vietnam’s 17 per cent.

With advantages of raw materials and prospects of vertical integration, India is a strong garment exporting country and a location worth considering for factory relocation in relation to labour-intensive manufacturing, such as garment-making.

The report pointed out that while China is the undisputed world leader in exporting textiles and garment products, many have overlooked India’s position as the world’s second biggest exporter of textile and garment products in 2014, selling a total of $36 billion, during the year, far behind China’s $399 billion.

For textile exports alone, India was second after China in 2014, with a share of 5.8 per cent of the global market, compared to China’s enormous 35.6 per cent share.

HKTDC says it is not surprising that the bulk of garment manufacturing in India is for the domestic market, supported by the country’s huge capacity in textiles production.

India stands out to be a substantial exporter in both garments and textiles. In 2014, India imported textiles worth only $3.8 billion, lagging much behind Vietnam’s $12 billion, Bangladesh’s $6.8 billion, and just ahead of Cambodia’s $3 billion, the report said.