Walmart Sends More Orders to India, But Factories Struggle with Worker Crunch

As U.S. retailers like Walmart and Costco pursue alternatives to Chinese and Bangladeshi suppliers due to rising tariffs, India’s garment industry especially the one in Tiruppur, Tamil Nadu finds itself in a unique and good position. The demand is climbing up but there isn’t enough labor to satisfy it according to the reports by Reuters.

Tiruppur provides around a third of India’s $16 billion in apparel exports and is seeing an uptick in inquiries from American buyers. Starting July, the U.S. will impose a 26% tariff on apparel imports from India (compared to 37% on Bangladesh, 46% on Vietnam and 145% on China) making India a more competitive sourcing country.

However, factories like Raft Garments are faced with a critical shortage of labor. “Even if orders come, we need labor. We don’t have the labor,’ says Raft Garments managing director R.K. Sivasubramaniam. The industry relies predominantly on migrant workers, many of whom leave to go work with smaller units, where they earn more money and work longer hours.

Some producers have tried to address this issue by investing in automation and opening training centers in their workers’ home states. However low skilled labor remains a significant challenge in retaining this dedicated and trained labor.

The higher labor costs in India $180 per month vs Bangladesh’s $139 also complicate their ability to compete. As a result, U.S. clients are demanding that their Indian suppliers offer pricing equal to Bangladesh’s prices, effectively squeezing their margins.

Walmart has significantly increased its imports from India with 1,100 containers shipped from April 2 to May 4, which is nearly double that time last year. While this indicates more interest, the fractured sizes of factories in India and issues of inefficiency in the way they operate significantly limit the ability to scale.

While there are many opportunities because of global trade shifts, India’s garment sector must overcome labor shortages and costs in order to take full advantage of new opportunities.