Why you should care
A slowing economy is preying on India’s sports equipment-makers.
Faint thuds from a game of cricket being played by boys in gleaming whites can just be heard in the workshop, where craftsmen delicately shape chunks of imported English willow into rudimentary blades. The resulting cricket bats are destined to be sold in India, the United Kingdom and beyond.
The family-run FC Sondhi & Co. factory, in India’s sporting-goods manufacturing hub of Jalandhar, makes New Balance–branded bats for superstars such as England captain Joe Root and Australia opener Aaron Finch. But few local manufacturers have succeeded in attracting international stature.
Many are struggling to compete with long-standing competitors in Pakistan, as well as with newer manufacturing centers in Asia, from China to Vietnam, that have emerged as favored locations for international sports brands.
P.C. Sondhi, chairman of FC Sondhi, says India’s equipment-makers have struggled to scale up productivity to levels required to fend off the heightened competition of the past few years. “There’s a major problem, everyone recognizes that,” he says. “The export market has been pretty stagnant.”
The industry’s struggles echo those of other Indian manufacturers that have failed to profit from shifting global trade patterns.
There hasn’t been that focused intervention on the part of the government to make these [manufacturers] more efficient.
Biswajit Dhar, trade economist
With the U.S. raising tariffs on Chinese goods in recent years, manufacturers have relocated to other Asian nations, such as Bangladesh and Vietnam, that have enjoyed robust export growth as a result. Analysts believe India has been unable to capitalize on the trade war because a lack of scale, poor infrastructure, and tough land and labor laws limit India’s attractiveness.
“There hasn’t been that focused intervention on the part of the government to make these [manufacturers] more efficient,” says Biswajit Dhar, a trade economist at Jawaharlal Nehru University. Manufacturers leaving China “are not coming to India. They’re going to southeast Asia, and even Mexico, but not India.”
India’s merchandise exports fell for a fifth consecutive month in December by 1.8 percent from a year earlier, according to the Commerce Ministry. Domestic demand has fallen too, as India suffers a sharp economic slowdown, with gross domestic product growth dropping to a six-year low of 4.5 percent year over year between July and September last year.
Prime Minister Narendra Modi’s decision in November not to join the Regional Comprehensive Economic Partnership, a China-backed Pan-Asian trade deal involving 15 other countries, has not been universally welcomed in India.
While some manufacturers applauded the move, arguing that membership would have opened up India’s markets to a flood of cheap Chinese imports, others warned that India’s manufacturers would find it harder to enter global supply chains if the country did not join trade blocs.
“Manufacturing competitiveness is a real big problem,” Dhar says.
Some steps are being taken to address the problem. Indian companies have invested in technology to produce the carbon-fiber bodies that used to be found only in Pakistan-made hockey sticks, for example.
Ajay Mahajan, whose Goodwin Sports makes martial arts equipment, says the company can weave the sturdy cotton fabric needed for judogi judo uniforms, which was previously imported. “Now we are at par,” he says.
India’s government has taken action to boost manufacturing exports. In September it cut corporate taxes from 25 percent to 15 percent for new manufacturing companies that incorporated from October, levying an effective rate of 17 percent, one of the lowest in the region. Modi hopes this will lure manufacturing business out of China.
“The government is supportive,” says Mahajan, who is also chairman of the Sports Goods Manufacturers & Exporters Association. But, he argues, more help is needed, such as cash incentives to help secure contracts with foreign brands.
Sondhi hopes for further government reforms, highlighting labor laws. That would make it easier to expand and contract production in line with demand, and help accelerate growth, he says.
And there is scope for India’s sports manufacturers to expand domestic sales, with geopolitical tensions creating an unexpected opportunity.
Until recently, India bought a lot of sports equipment, such as hockey sticks and boxing gloves, from Pakistan. But that trade effectively stopped with the flare-up in tensions between the two countries in February last year, which prompted a 200 percent rise in tariffs.
“It’s a blessing in disguise,” says Mukul Verma, whose Jalandhar company, Savi International, makes rugby balls. “On the one hand you won’t get fantastic-looking products at a good price, but on the other there’s a big opportunity. Why don’t you make it in India and start selling it?”
Sondhi is positive about the industry’s longer-term potential, betting the domestic opportunity will eventually counter any export woes. Rising incomes in India, he says, mean that more of the country’s ardent cricket fans fork out for pads, balls and bats. “The market is in the doldrums,” he says, while hoping that in the long run it would be “booming.”
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