Sudden drop in demand in Europe dethrones India from its paramount place in world carpet market

Weavers: making do with lessIndian carpets are not flying high any longer. A sudden drop in demand in Europe combined with the entry of other aggressive rivals from the Third World has literally dethroned India from its paramount place in the world carpet market.The industry has been affected all along the line. Even the Government-owned Handloom and Handicrafts Export Corporation (HHEC) which by this time last year had done business worth Rs 2.5 crore has only orders for Rs 95 lakh this year. The story is the same throughout the industry.Says J. P. Agarwal. a prosperous carpet dealer from Bhadoi: "In 30 years of trading I have seldom been let down by my foreign buyers, but all of a sudden I find I have Rs 5 lakh worth of carpets stuck in Hamburg without takers, and production at home is down by 50 per cent." The same complaint is also voiced by smaller businessmen in the field whose troubles are even more acute. Says Pradeep Garg, a youngster who entered the field recently: "My payments to the carpet weavers I employ are time bound, so unless I get a regular income from sales abroad, I am in trouble."Two Centres: Over the years the Indian carpet industry has been concentrated in two main centres. Nearly 75 per cent of the woollen carpets are- made in Bhadoi and surrounding areas in east Uttar Pradesh. The centre for silk carpets is in Kashmir. In Bhadoi, which is dependent on the carpet-making business, the effects of the slump have already been felt as rates for knotting one square metre of low quality carpet have dropped from Rs 200 to Rs 180.The finished carpets find their way from the backward rural districts of Uttar Pradesh to the port city of Hamburg which is the carpet capital of Europe. From there they are distributed to the other countries of Western Europe. This trading arrangement has proved beneficial for the Indian industry in the past.This year, however, it has proved to be its undoing. As an official of the All-India Handicrafts Board explains: "In recent months the value of the Deutsche mark has fallen in comparison to the dollar, and our carpets have become too dear for Germans to buy. The same is true of other European currencies as well."The falling fortunes of the Deutsche mark is probably only a temporary phenomenon, and if this was the only reason for the present slump it would not be a great cause for worry. But the carpet industry will have other challenges to face in the coming years.The biggest threat is posed by China which has entered the market in a big way. The dimension of the threat was vividly demonstrated this year when the Chinese, in a bid to capture the market, dumped more than Rs 350 crore worth of silk carpets on the European market at prices nearly 30 per cent cheaper than Kashmiri carpets. Businessmen point out that China can be a formidable opponent. With its closely regulated system the Chinese have several advantages such as cheap organised labour which enable them to keep their prices low.And this is not their only strong point. The newly cultivated Sino-US honeymoon has been a boon for the Chinese carpet industry. The Americans have reduced the import duty on Chinese carpets to a mere 8 per cent. Besides, the Chinese will never have any problems about raw materials. They have access to high-quality Tibetan wool and could, as Hari Krishan Wattal, a leading exporter from Agra, points out, be expected to enter the woollen carpet-making business very soon.Immediate Threat: China is not the only competitor in the international market. A more immediate threat is posed by Pakistan. Though a comparative new comer to the business. Pakistan has made rapid strides in recent years. Indian businessmen contrast Pakistan's progress and India's slow slide backwards to emphasise their grouse that they are not receiving the right kind of help from the Government to keep their prices competitive. Says an agitated Wattal: "In 1978-79, for instance, India exported 100 tonnes of wool. Until April we had to pay 45 per cent duty on imported wool which means that imported wool worth Rs 100 ends up costing nearly Rs 150 by the time the cess is paid. The wool we export earns only Rs 280 for every eight kilos. If those eight kilos were used to make a carpet it could earn Rs 1, 680." Besides, Wattal points out. "The wool scarcity leads weavers to try and economise by putting fewer knots in carpets, or mixing it with inferior yarns, which affects the country's image as a reliable supplier of high-class carpels. The scarcity also leads to black marketing in wool." Agarwal adds that China's import duties unlike India's are always deliberately kept low.The carpet industry has grown in enormous leaps and bounds in the last few years. In 1972 exports were a mere Rs 16 crore. Last year they had risen to Rs 135 crore. And despite their present problems carpet manufacturers remain optimistic about the future. Says Wattal: "The market should expand tremendously because of the hunger for oriental pile carpets in Europe and America. The snob value of these hand made carpets will remain intact."Optimism: This view is supported by the Indian Institute of Foreign Trade (IIFT), which predicts that demand for handmade pile carpets will rise from its present Rs 900 crore to Rs 1,600 crore by 1986. The IIFT also predicts that the increased demand will be mainly for Persian carpets. This, as one exporter gleefully points out, is an area in which India is ahead of other countries. As one carpet dealer admits: "The sale of Indian carpets only got going when we began to copy Persian designs. In the West the words carpet and Persia are synonymous. Now we excel in this field."Iran's slow slide to anarchy has also affected its carpets sales. Says Mohammad Ansari, another leading exporter: "My buyer in the US is a man of Iranian origin. Formerly he would go to Iran, bring out carpets, and sell them in the US. Now he is too scared to go there for fear of reprisals because of his US connection. So he comes to India to buy Persian carpets from me instead."But Kashmiri carpets which are very much like Persian carpets and which gained most from the events in Iran suffered after the recent income tax raids in Srinagar. The raids which raised a political storm dislocated business and buyers were unable to lift stocks.The carpet industry has brought about an economic revolution of sorts in Bhadoi, Mirzapur, Agra, and in Kashmir. And there is no doubt that, despite the present gloom, there is still ample scope for growth. But that needs greater export incentives. And the right time for that is now.Published By: AtMigration Published On: Oct 30, 2013 11:34 IST--- ENDS ---

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Sudden drop in demand in Europe dethrones India from its paramount place in world carpet market

Indian carpets are not flying high any longer. A sudden drop in demand in Europe combined with the entry of other aggressive rivals from the Third World has literally dethroned India from its paramount place in the world carpet market.

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