Narayanan Somasundaram / Reuters
Mumbai: India’s textile firms, much touted for their low-cost workforce, are now easing up on hiring despite large expansion plans, stepping up automation to boost quality and production.
Cheap labour was key for a shift in textile production from the west to countries like India and China. But local firms, hit by the rupee’s rise and wage inflation, are bucking the trend and aping western peers by automating work floors.
“We just cannot be liberal with recruiting workers anymore,” Sunil Khandelwal, chief financial officer at garment and fabrics maker Alok Industries, said. “We have to run a tight ship and labour cost is a priority.”
Alok, over the last four years, has spent Rs29 billion to expand and Khandelwal said automation raised total capital cost by about 15%.
Low wages give no edge: Analysts estimate Indian workers’ efficiency at 35%, compared with 55% for a Chinese worker; quality issues also plague Indian firms in an industry where one wrong knot can lead to mass rejections
Lakshmi Machine Works, India’s top textile machinery maker, says almost a third of the machines it sells have robots to pull out the yarn-spun spindles, up from none two years ago. It expects it to rise to half of its machines in two years.
“We’ve been offering these systems for the past five years, but demand has suddenly shot up despite it being 50% costlier,” Lakshmi CFO, R Rajendran, said.
Gokaldas Exports Ltd, majority owned by private equity firm Blackstone, has roped in consultants to help streamline costs after the rupee rose 12.3% against the dollar in 2007, eating into margins.
“Salaries may be lower but Indian workers’ productivity is even lower and the eventual cost is higher,” managing director Rajendra Hinduja said. Added to the burden is annual wage hikes at at least 15%.
Gokaldas employs 51,000 people across 47 factories. Analysts estimate Indian workers’ efficiency at 35%, compared with 55% for a Chinese worker. Besides, quality issues also plague Indian firms in an industry where one wrong knot can lead to mass rejections.
Firms contend more automation is the solution to their woes, a strategy, analysts believe, will lead to over-engineering, eventually killing the move to shift to centres that boasted wages at a fraction of the cost of the developed countries.
But the belief is “fewer workers maker fewer errors,” said Prashant Agarwal, associate director, at consultancy Technopak.
Industry players agree. Firms such as Alok, Welspun India and some southern players have paid more for robots for non-critical processes like pulling and linking yarn. These used to be run with five people to a machine.
“For now productivity is the focus, but things can change if minimum factory wages are revised across the country,” the head of a north-based firm, requesting anonymity, said referring to pockets near Delhi that have increased wages.
Still, companies like Welspun prefer automation. The company, which began making bed linen and quadrupled terry towel capacity in the last four years, has hardly increased its workforce, buying more machines instead.
“We have always wanted to be technologically ahead. Automated machines increase productivity and quality, labour limitation is just a by-product,” group president Akhil Jindal said.