THE KARNATAKA government has raised the minimum daily wages for workers in the

state by between 25 and 30 per cent, according to reports. The hike, the biggest to date
enforced by the Minimum Wages Board (MWB), has ironically come at a time when the
industry in general and the garment sector in particular is struggling to stay afloat. This is
clearly an act of impertinence on the part of the Karnataka government and is totally uncalled
for. Far from helping the industry wriggle out of the current crisis, the government of
Karnataka, by its action, has made things even more difficult for the garment industry.

The garment sector is export-driven and even at the best of times, the margin earned by this
sector has been thin. This is because garments are exported to the US and the west by some
developing countries in our neighbourhood which are ‘low wage packet’ islands compared to
India . In Bangalore, more people work in the garment industry than in the IT industry – in
fact, the garment industry provides employment to 6 lakh people. Unlike the IT industry, the
garment industry provides employment to unskilled and semi-skilled labour. India’s garment
industry is easily worth USD 9 billion and Bangalore is the industry’s key hub. Star export
houses like Gokaldas Exports operate out of Bangalore.

Given that industrial relations are less than perfect at the present juncture in Bangalore, the
government of Karnataka’s decision is sure to add fuel to the fire. No thanks to the
government decision, an unskilled worker in Karnataka will now get Rs 127 per day. In
Andhra Pradesh, the unskilled worker gets Rs 105 per day. In Tamilnadu, he gets Rs 108 per
day. Ironically, the highly-skilled labour in Karnataka like cutters and tailors get only Rs
134.30 per day. Semi-skilled labour gets only Rs 131.70 per day. I am yet to come across a
more skewed logic. The wage structure encourages unskilled and under-skilled personnel and
discourages those who would like to add to their skill sets by rewarding them nominally!

It is feared that the hike imposed by the government of Karnataka will leave Bangalore the
most expensive destination for apparel sourcing in South East Asia. It is estimated that
Bangalore is about 60 per cent costlier than Vietnam, one of the fastest growing hubs for
apparel sourcing. Bangalore is 120 per cent costlier than Bangladesh, in our immediate
neighbourhood. One hopes that the Karnataka government is aware of the fact that
Bangladesh is now ahead of India in garment exports, thanks to their government’s exporter-
friendly policy. Its exports crossed USD 10 billion last year and the only advantage the
Bangaladesh exporters boast of is the cost advantage.

The government of Karnataka has to realise that in the last seven months of fiscal 2008-09,
apparel exports declined by between 7 and 9 per cent every month except in January 2009,
when it witnessed a growth of 5 per cent. Exports from the country witnessed a growth of 30
percent in April 2008; the figure for April 2009 , it is feared, will show a negative trend.

As a matter of fact, the industry is looking forward to a change in export-import policy from
the in-coming government. It is also looking forward to a labour policy which is labour-
friendly but pragmatic and workable at the same time. In the absence of effective labour
reforms, productivity cannot be achieved in the industry. This explains why our garment
products are priced 10 per cent higher than world prices; or our apparel market accounts for a
measly 2 percent of world trade.

On its part, what has the Karnataka government contributed to the state’s garment industry so
it could enhance its cost competitiveness? It supplies poor quality power to the garment units
at an exorbitant price – exorbitant compared to the price paid by units in the other states of
the south. The supply of power often gets erratic. So, far from hiking the daily wages payable
to the employees of the garment sector at a time when the sector itself is passing through a
crisis, the government of Karnataka should set its own house in order. It should also take it up
with the central government to raise the duty drawback percentage from the extant 9 percent
to 14 per cent.