CHAPTER - IV

MARKET MECHANISM

150

CHAPTER - I V

In view o f the tremendous sign ificance of

marketing in the m odem business, it would be worth­

w hile to examine the market mechanism o f carpet

industry in Kashmir„ The present Chapter is therefore,

devoted to this type o f study so that a correct pers­

pective o f market mechanism is id e n t ifie d . An attempt

w ill also be made to h ighlight the weaknesses in the

system and suggest remedial measures.

SIGNIFICANCE OF MARKETING

Marketing has rightly been regarded as the

key to the success o f modern business . This view is

further Corot©rated by P eter Drucker, who says that

"there is only one valid defin itio n o f business

Ipurpose: to create a customer." He further says,

"Because it is its purpose to create a customer, any

business enterprise has two — and only these two --

2basic functions: marketing and innovatio n ."

Viewed against th is , it can safely be conclu­

ded that "any organisation in which marketing is either

1„ Drucker, P .F . , "The Practice o f Management" Pan Books L t d . , London (197 3 ), P . 52.

2 . Ib id , P . 53.

151

absent or incidental is not a business and should

never be run as i f it were one. The world, as we

know, i s passing through a marketing revolution at

present. The modern concept o f marketing has given a

new dimension to the very thinking o f marketing system

in a business organisation , whereby the customer has

become the sovereign, perhaps for the first time in

human h isto ry . The o ld concept o f marketing was produc­

tion oriented in which no care was taken o f the buyers'

in terests , wants etc* However, with the change in times,

marketing concept has now become Consumption oriented .

With a view to appreciate th is , it would be

quite interesting to review some o f the d efin itio n s o f

marketing management. This i s not only benefic ia l but

also im perative, so as to understand the philosophy o f

m odem marketing and to examine how best the existing

state o f marketing the Kashmir carpets conforms to the

modern p rin cip les o f sc ien tific marketing.

To quote Peter Drucker again, "M arketing is

not only much broader than selling , it is not a

specialised activ ity at a l l . I t encompasses the entire

businews. I t is the whole business seen from the point

3. Op. C i t . P . 53

152

o f view o f its final result, that i s , from the customers

..4point o f v ie w ."

Marketing is a comprehensive process o f bridgin

the gap between the producer and the consumer. I t " i s

5the creation and delivery o f a standard o f l iv in g ."

Marketing in a dynamic sense involves; find ing out what

consumers want? then planning and developing a product

or service that w ill satisfy those wants, and then

determining the best way to price, promote and d istribut

6that product or service.

Stated more formally, "marketing is a total

system o f business a ctiv it ies designed to plan, price,

promote and d istribute want-satisfying goods and

7s e n d e e s to present and p o te n t ia l ."

Hence in the light o f the above defin itio ns

and concepts o f modern marketing, the market mechanism

o f the carpet industry in Kashmir w ill be examined in

the following pages.

4. Drucker, Op. c it . P . 5 4.

5. Stanton, W . J . , "The Fundamentals o f Marketing" Tata McGraw H il l , Publish ing Company. P . 5.

6 . I b id , P . 5.

7 . Stanton, I b id . P . 5.

153

MARKETING OF KASHMIR CARPETS

Hand-knotted carpet industry o f Kashmir is

h ig h ly export-oriented in it s marketing efforts as more

than 90 percent o f the total carpet production is expor­

ted to various foreign Countries, l ik e Federal Republic

o f Germany, France, United Kingdom, BLEU, Switzerland,

8A ustralia , United States o f America, Sweden etc . Most

o f these countries are economically developed countries

o f the world. Besides, the ultimate customer for the

Kashmir oriental hand-knotted carpets is the effluent

c lass o f the society in these countries, because on

account o f the relatively high price o f oriental

carpets, they are regarded as luxury items and purchased

9m ainly by customers in the upper income groups.

C ollectors belonging to the highest income

groups form an important market segment fo r the best

q uality oriental carpets. Thus Kashmiri carpet

industry has to cater to the needs o f a market which is

h ig h ly customer-oriented and geographically d iv e rs ifie d .

Kashmir is also facing very strong competition from

8 . Based on fie ld investigation .

9 . ID S , "Contribution o f Handicrafts and Handlooms to In d ian Development" Product Review Paper 2, In du stria l Development Services, New D e lh i, 198 2.

P . 2-5.

154

other carpet producing countries l ik e Ir a n , Pakistan

China , Turkey and Afghanistan. Keeping all these factors

in view ,J it becomes essential to evolve an effective

export marketing strategy for the carpet industry o f

Kashmir. On the one hand there is enormous export

potential for Kashmir carpetein foreign markets, w hile

on the other the task of exploiting this potential seems

10a challenging one. What is needed, therefore, is to

evolve an appropriate marketing mechanism, which could

e ffe c t iv e ly and successfully meet these challenges.

For th is purpose a review o f the following issues

beoom 9s imp erative.

CHANNELS OF DlSTRIHJTIQN

In the marketing mechanism, trade channels play

a crucial role. Channel decisions influence the p rice

which the buyers have to pay. I t is a vital part o f the

marketing mix.

"An export marketing channel is a system composed

o f the chain o f marketing agencies o r institutio ns which

connect the manufacturer with the final consumer o r„nusers o f h is products in overseas markets. In

10. For a detailed discussion Qf export rotential o f Kashmir carpets, see Chapter V.

.11 . Rathor, B .S . "Export Marketing" Himalaya Publish ing House (Bombay) 198 3, P . 118.

155

bringing the hand made carpets from the primary producer

to the fin a l consumer in another country (usually the

developed one) a good number o f interm ediaries play

an active role. The most frequent chain o f linkage in

Kashmir carpets is from artisan to manufacturer to an

exporter who then supplies it to an im porter/wholesaler,

who in turn sells the same to the reta ilers from where

it reaches the fin a l consumer. There are number o f

variations in the sequence through either a reduction

or a further increase in the number o f participants

in the chain . The diagram given on the next page

depicts some o f the main channels o f d istribution

involved in the export trade o f Kashmir carpets.

The diagram depicts the complex nature o f the

trade channels involved in the marketing o f Kashmir

carpets. F o r the sake o f convenience these channels

have been c la ss ified into two groups v iz . a) Internal

b) External.

a) Internal Channels o f D istrib u tio n

The internal channels operate w ithin the

country starting from the weaver in Kashmir. They end

up wi/th the exporters o f carpets. A b r ie f description

o f the various channel combinations operating within

the country is made hereunder.

156

Diagram Showing Export Trade Channels for hand-knotted _________________________________ Kashmir Carpets_______________________

CARPET WEAVERS IN KASHMIR

Weavers on sub­

contracts

Weavers Small and Coopera­ Public

on own medium tiv e S ecto r

Account si zed manufac­ Manu­

C arpet turing factu­

manufac­turers

Socie­ties

rers

Manufac­turer Expo rters

BROKE RS/MIDD LEMEN

MerchantExporters

Public Sector Exporters ( JKHC/HHEC )

Man uf ac t u rer Exporters

EXPORTERS IN INDIA

r_________________________ - — -_________------------ -——- -IMPORTERS IN FOREIGN COUNTRIES

I ttido rt er- Wholesalers

Major Retailors Departmental and Chain

Sto res

R etailerBuyingGroups

Oth ers

______ Jt_______M ail order Houses_____

— —̂ — — 1 '* Specialist Carpet Retailers

e n d " USERS IN IMPORTING COUNTRIESv

Source: Diagram prepared by the scholar on the basis o f information obtained through investigation and desk research.

15 7

*Fj Manufacturer —» Merchant Exporter

Under th is channel the manufacturer or the

weaver on h is own, sells the products d irectly to the

merchant exporters in Srinagar. Although th is channel

is re latively very short, yet its share in the total

d istrib utio n o f Kashmir carpets is lim ited because of

the following reasons:

a) exporters generally purchase on credit

basis from the manufacturers,

b) they are not in a position to provide

advances to the manufacturers, and

c) ind iv idual manufacturers do not o ffer

wide range o f carpet designs o f varying

sizes to exporters.

In view o f above shortcomings, th is channel

is not quite popular and hence scarcely adopted by the

m anufacturers and exporters,,

1 1 ) M anuf actu rer/Bxpo rt er

This is the shortest channel of d istribution

a vailable w ithin the country. Under this system the

manufacturer him self exports h is products. In other

words manufacturer and the exporter are one and the

158

same person. Most o f the carpet exporters in Srinagar

prefer to be id e n tified as manufacturer-exporters,

because i t gives them better reputation in the market.

For th is purpose they usually run and manage few

carr>et weaving looms w ithin a factory type premises.

Truely speaking they are stockists and purchase bulk

o f th e ir stocks from middlemen or small manufacturers.

What we have in mind here are those exporters who contribute

a substantial amount to the value added o f the production.

On investigation it was found that only a few leading

exporters in Srinagar fall w ithin this category. The

advantages of manufacturer-exporter over a merchant-

export er are:

i ) lower prices leading to increased demandt

i i ) a stronger Commitment to and a thorough

knowledge o f h is products since h is survival

depends on perfection and excellence in

production,

i i i ) a stronger commitment to h is vrork force

since h e gives them assured employment,

iv) better checks on the production process and

hence better control on quality , d elivery

schedules and designs.

However, in spite o f the above b en efits , th is

channel contributes only about 10 percent o f the total

export trade o f Kashmir carpets/ because it suffers

from following lim itations:

159

12

±y The exporters do not find themselves

in a position to devote much time to

the production side,

i i ) the production has become goD graphic a lly

d iv ersified and hence d if f ic u lt to manage,

and

. i i i ) Exporters also face the problem o f dearth

o f finances for undertaking production.

Manufacturer -•» Broker —» Exporter

This is most commonly used channel o f d is t r i ­

bution . I t has been estimated that more than 60 percent

o f the total production passes through this channel,

13ind icating the popularity and dominance o f the same.

Under th is channel the manufacturers o r the weaver on

h is own sells the products to a new class o f middlemen

known as Brokers, on cash b a s is . The brokers in turn

sell th e ir stocks to merchant-exporter s. The present

study reveals that brokers perform the below mentioned

useful functions in th is channel.

12. Based on f ie ld investigations

13. I b id .

160

— Broker acts as an important link between

the exporters and the small weavers/

manuf c3Cturers?

— He makes cash purchases from the manufacturers

and even extends advances to them,

— Controls the quality o f the production,

— Extends credit sales to the exporters, and

— Dumps overproduction at the time o f slump

in the trade-

in view o f the above advantages th is channel

has proved to be b en efic ia l to the trade. Erokers play

a useful role for which they receive a compensation.

However, one o f the lim itations of th is channel is

that it is relatively lenghty one and hence increases

the p rice o f the end product. Besides, it provides

a chance to unscrupulous brokers to exploit the small

weavers/manufacturers.

IV) Manufacturer -» P u b lic Sector Exporter

H andicrafts and Handlooms Export Corporation

o f In d ia (HHEC) and the Jammu and Kashmir Handicrafts

(Sa les and Export) Corporation (JKHC) are the two leadin

p ub lic sector organisations, which have been established

in the State to help boost up the export o f Kashmir

h andicrafts including that o f carpets. These

161

Cornorations are expected to play an important role

in the growth/and development o f th is industry . They

are charged with the resp o nsib ility o f buying carpets

d irectly from small weavers/manufacturers and thereafter

sell them to the customers. The e ffectiv e functioning

of these Corporations could also reduce the dependence

o f weavers on middlemen.

However, it is disappointing to note that

these Corporations have not been able to play their

role effectiv ely . This is reflected from the fact that

only 5 oercent o f the total caroet exnorts from the

State is routed through these two Corporations, where

as 95 percent is routed through other channels mostly

14p rivate exporters.

y ROLE OF HHEC IN MARKETING

Handicrafts and Handlootn Export Corporation o f

In d ia has all the necessary infrastructure to increase the

export in hand-knotted carpets from Kashmir, i t has a design

cell and a number o f showrooms with retail outlets abroad

from where it can get consumer feedback. I t has also ware­

housing fa c il it ie s in the countries where it operates. This

enables it to stock the product. I t i s prim arily an

14. Based on f ie ld investigations and desk research.

162

exporting concern and has done a commendable service

to I n d i a 's hand-knotted carpet weaving industry . In

the fie ld o f hand-knotted carpets, HHEC played a pionee­

ring role in developing persian-design carpets in

In d ia . As a result o f which In d ia has emerged now a

world leader. Carpet exports handled by HHEC touched

15a new height o f Rs. 10 .1 crores in 1979-80.

However, it is d istressing to note that the

share of Kashmir carpets in the total carpet exports

o f HHEC is not more than Rs. 10 to 20 lakhs, that is

16about 2 percent of the total at present. This perfor­

mance appears to be not very encouraging one, when

compared with its long standing experience in handi­

crafts sales and exports, especially hand-knotted

carpets. I t seems that HHEC i s tiot seriously interested

in the promotion o f Kashmir carpets. According to

Mr. S. C . Jo sh i, General Manager o f the Hamburg branch

o f the HHECt "The position for Kashmir carpets is

even worse because the HHEC has a large volume o f

unsaleable carpets that were purchased from Srinagar

15. ICRIER , "In d ia n Handicrafts Exports: Constraints and Prospects" Indian Council o f Research on In te r ­national Relations, New Delhi (1985) P . 4 .2

16. Based on f ie ld investigatio n .

163

withoug selection or quality control. Only 5 percent

o f the stock o f Kashmir carpets are saleable and

17even those have to be sold at rock bottom orices.

This shows the callous attitude o f the HHEC towards

the Kashmir carpets. The simple question arises as to

why such rubbish was purchased from Kashmir? and i f

purchased for one reason or the other, why was i t sent

to Hamburg? This needs to be probed.

ROLE OF JKHC IN DISTRIBUTION

The Jammu and Kashmir Handicrafts (Sales and

Export) Corporation (JKHC) was incorporated in the

year 1970/ with the object o f popularising and promoting

18the handicrafts o f Jammu and Kashmir. in the f i e l d

o f carpet exports the progress registered by the

Corporation during a period o f S ix years is depicted

by tab le 4. 1,

Table 4 .1 reveals that the export sales turn­

over o f JKHC in the f ie ld o f hand-knotted carpets has

increased from Rs. 1 7 .63 lakhs in 1977-7P to Rs. 42 .29

lakhs in 1982-83. However, when compared with the

17. I lF T , "Market Opportunities for Handicrafts o f Jammu and Kashmir" Indian In st itu te o f Foreign Trade, New D elh i (1983^ P . 221.

18 . “ Annual Report & Accounts" 1971- 72). The Jammu and Kashmir Handicrafts (Sales and Exports)

Corporation L t d ., Srinagar P .3 „

164

Year-wise Value o f Carpet Exports from J&K State and through JKHC ( 1977-78) to 1982-83)

Year J&K State JKHC % Share o f

(Rs. in lakhs) Rs. in JKHC in the State _____ lakhs)

Ta b le 4 . 1

1977-78 8 4 9 ,0 0 1 7 .63 2.07

1978-79 1210 .00 2 6 .70 2. 20

1979-80 269 6 .00 2 8 .8 6 1.07

1980-81 2680 .00 27 . 46 1 .02

1981-82 2445 .00 36 .21 1. 40

1982-83 2310 .00 42 . 29 1 .8 3

Source: Compiled by the scholar on the basis o fdata obtained from : i) D irectorate o f Handicrafts, J&K Sgr. i i ) S ta tist ic a l C e ll , JKHC, Srinagar.

total export o f carpets from the State, the share o f

JKHC seems to have feeen declined, from 2.07 percent

to 1 .8 3 percent during the same period. This perfor­

mance appears to be not very encouraging compared with

its long standing experience in handicrafts sales and

exports. I t seems that JKHC is presently concentrating

on sales in the domestic market through its 22 retail

t 19o u tlets in all m etfopolian c it ie s o f the country.

19. Based on fie ld investigation .

1G5

The domestic sales o f Kashmir carpets by the Corporation

are quite im pressive, which i s revealed by the fact

that during the year 1982-83 the domestic sales o f

20carpets amounted to Rs. 1 0 1 .4 lakhs. I t further

ind icates that the present set up o f the Corporation

i s , however, not doing it s best to boost up export

o f carpets in a b ig way.

In order to prove its usefulness for the

development o f one of the vital handicrafts of the

State , the Corporation has to play a pivotal role fo r

the development o f export o f carpets, p articularly

those manufactured by small and marginal weavers. It

should be the endeavour of the Corporation to reduce

the chances of exploitation of the small weavers by

the unscruplus private exporters. I t has been seen

that these exporters buy the carpets at relatively

lower prices , and later on sell the same at lucrative

p rices .

JKHC should therefore, gear up its a c tiv it ies

and rid i t s e l f o f these infirm ites , so as to make i t

a powerful instrument in export promotion. For th is

purpose, it should open a few showrooms/ warfehouses

20. O f f ic ia l records, S tatistic al C e l l , J&K Handicrafts (S&E) Corporation, Srinagar.

IGG

in p o ten tia lly important foreign markets,, To begin

with a showroom may be established in Hamburg, West

Germany, as this i s one o f the most important tradihg

centres for oriental carpets in the world.

e x t e r n a l c h a n n e l s o f d i s t r i b u t i o n

External channels o f d istrib utio n link the

Indian exporter with the ultim ate user in the foreign

countries . Following are the two main external channels

o f d istrib u tio n for the export marketing o f Kashmir

carpets.

!),■ Im porter/W holesaler -■> Retailer —» Consumer

I t has been estimated that more than 7 0 percent

o f the total carpet exports from Kashmir oass through

21this channel. Most of the importers buy carnets

d irect from Srinagar. They sell in turn to specialist

oriental carpet shops, departmental stores/ mail order

houses and furnishing sp ecialists .

Importer-wbolesalers are specialised in one

o r more products and thus have a thorough knowledge o f

th e ir products. There is a lot o f competition in th e ir

21. I IF T , "Market Opportunities for Kashmir H a n d icrafts " Ind ian In st itu te o f Foreign Trade / New D elh i (l983)

P . 107 .

16 7

business and they survive on good purchasing. They

cater to a ll types o f reta ilers , but th e ir greatest

success lie s in supplying goods to small retailers

and speciality stores. They spend lot o f th e ir time in

supplying countries and develop the sk ill o f the firms

they work with . They order large quantities and also

22.carry stocks.

On the negative side , importers o ffe r lower

prices to Kashmir exporters than retailers do which

gives a temptation for exporters to contact retailers

d irect . Also because d irect buying by retailers elim ina­

tes the importers link , th is often results in a lo^er

retail price and hence increased demand.

I I . Im pprters/R etailer —> Consumer

There are many d ifferen t kinds o f retailers

including boutique stores, departmental stores, chain

stores, discount stores and mail order houses. D irect

buying by retailers is normally confirr edjto large

chain storer or to a conglomeratio'of deparement/

chain stores. Top quality carpets tend to be sold in

specialist shops and lower and medium quality by

22 . ICRIER "In d ia n Handicrafts, Exports: Constraints and Prospects" Indian Council o f Research on international Economic Relations, New Delhi..

( 198 5) 'P. 4 .2 4.

168

department stores. The average quality carpets handled

hoth by mail order and furnishing specialists is said

to be distinctly higher than that by the department

23stores.

Retailers generally do not have a deep knowledge

of a product as the importer/wholesaler. However, there

is a class of a select few retailers who have developed

their own designs and bear all the risks o f the trade.

Retailers who are quality conscious and spend more than

a week or two with their customer, are considered

highly desirable by firms in developing countries.

As it takes very l ittle to become a merchant

exporter people who enter the business often have no

commitment to the product development and no regard

for the rigorous business culture in the developed

world. There is , thus a need for Orderly Marketing

Arrangements, where only committed few could be

allowed to export because casual exporters do a great

deal o f demage in keeping o ff potential

buyers. However, this may not be practlceable in

23 . IIF T , "Market Opportunities for Kashmir Handicrafts 1983, P . 107.

24. Kathuria, S . "Indian Handicrafts Exports: Constraints and Prospects" ICRIER, New Delhi 1985 P .

169

democratic In d ia . The next best solution is ,t h e r e fo r e ,t o

give p o sitiv e incentives to those with commitment to the

product, to their suppliers and to their buyers. In th is

connection manufacturer-exporter i s the one category

who might best fu l f i l these requirements and could be

considered, f0 r suitable Government support e .g . a labour

25subsidy.

On the external side, the general strategy for

exporters should be to supply to only a few importing

firms in one country. On the whole importer-wholesaler

are more Committed to the development o f a product than

reta ilers and should be preferred buyers.

The public sector organisations involved in the

trade / especially JKHC and HHEC should p lay a pivotal

role in export, marketing o f Kashmir carpets, so as to

prove b eneficial to small and cottage weavers/manufacturers.

PRODUCT STRATEGY

The Product is another important ingredient o f

a marketing strategy. Decisio ns regarding product relate

to the quality o f the product, including raw m aterials ,

25. Kathuria, S. Op . C it . P . 4 . 3l.

26. Jha , B. "Product Strategy for Carpet Ind u stry ",Indian Journal o f Marketing '.May-June 1982)

New D e lh i, P . l l .

170

colours and designs used, labelling , packaging and

branding, s ize o f the product, product innovation etc.

"Decisions In respect o f all these components eventually

determine the selection of channel, fixation of price

26and designing o f the promotional programmes.

"One key to success in product planning is to

adopt it to the cultural tastes and economic character­

is t ic s o f the particular foreign market, rather thanII

try to sell it abroad, in general. 27

To decide whether a product is suitable for a

market and whether it should be m odified, one must

determine how it fits into the demand requirements o f the

market. For th is purpose, the characteristics o f a

product should be id e n tifie d first and then efforts

made to match the main demand requirements with i t .

With this theoretical background, the product

strategy for marketing o f Kashmir carpet is examined in

the following lines!

Product Characteristics and Demand Requirements for Kashmir C arpets

There is a tendency in Kashmir to emphasize and

26. Jha , B. "Product Strategy for Carpet industry" Indian Journal o f Marketing (May-June 1982) New D e lh i , P . 11.

27. Rathor B .S . , "Export Management" Himalaya Publish ing

House, Bombay (1983) P . 110.

171

concentrate on the density o f knots as a single most

important criterian o f quality o f a carpet. Whereas in

actual practice, a number o f factors determine the

q uality . The main product characteristics o f Kashmir

carpets are mentioned below:

I . Raw Material used,

I I . D esig n ,

I I I . Colours combination,

IV . Weaving and density o f knots; &

V. F inishing of the carpet.

It has been observed that most o f the carpet

manufacturers and exporters in Kashmir do not have a

fa ir idea o f Product Planning and Development. They

do not follow a systematic pattern o f m onitoring the

customer preferences and requirement regularly and

m odifying the quality o f their products accordingly.

In the ligh t o f several recent market surveys, product

ch aracteristics need to be m odified on the lines

indicated below:

1 • Raw M aterials Used

a ) Quality of Wool

Customers are generally o f the opinion that the

Wool used in Kashmir carpets is too soft Compared with

the tough resilence of the wool in fin e I rani an-carpet s.

172

Further, the quality o f wool used varies w idely and

needs to be made consistent. The standard to be taken

as model is the wool coming from white sheep from the

P la te au x o f north-west Ira n , where a tough wool

28p a rticu la rly suitable for carpet making is produced.

The wool should be properly sorted prior to spinning.

The Government may consider importing wool for blending

with lo c a lly available wool. Pakistan imports wool from

29Nowzealand for use in the carpet industry ,

b) Quality o f S ilk

I t has been reported that the quality o f s ilk

used in Kashmir carpets is o f satisfactory level.

However, it can not compete with the fineness of the

Chinese s ilk . But the real problem is the extensive use

o f a r t if ic ia l s ilk in place o f natural s ilk in Kashmir

carpets.

Problem o f Using A r t if ic ia l S jlk

It is d istressing to note that a substantial

portion o f the carpets manufactured in Kashmir, these

days are made o f a r t if ic ia l s ilk . According to the

28, I IF T "Market Opportunities for Handicrafts of Jammu and Kashmir" ( 1983) f>. 13.

29. Ib id . V. 13.

173

tentativ e figures announced by the D irector o f Handi­

crafts , J&K Government, staple carpets worth about

Rs. 10 crores were exported from Kashmir during the

30year 198 3-84. The share o f a r t if ic ia l s ilk carpets

in the total exoort o f Kashmir carpets is growing day

by day. Actually staple has onerged as a cheap substitute

to the natural s ilk . The introduction o f staple carpets

is certa in ly going to damage the refutation of Kashmir

as a manufacturer o f fin e quality carpets in the world.

The d u r a b ilit y of a staple carpet is v rry much short

lived and its apparent sheen and lusture fades away

only after short period o f use. I t has been reported

that a number o f carpet manufacturers, exporters,

importers and retail dealers misrepresent the staple

carpet as orig in al s ilk carpet. The customers who

have been cheated l ik e that, feel h ig h ly d is s a t isfie d

with Kashmir Carpets. This cheating should be stopped

forthwith .

In view o f the above situation , it is strongly

recommended that the Government of Jammu and Kashmir

should take e ffectiv e steps to ban the production and

export o f staple carpets with immediate effect . Manufac­

turers and exporters should also be pursuaded to desist

3o. Based on discussions with concerned authorities .

174

from using staple s ilk yarn in niacd of real s ilk , in

the longer interests o f the industry.

I I . Design

Design is an important part o f the quality o f

carpets which provide a specific pattern to the product

and fa c ilita te s quality d iffe ren tia tio n . The designs

in Kashmir carpets are mostly o f Persian o r ig in .

Most o f the customers are of the view that

designs in Kashmir carpets lack creativity as compared.

31with those o f Iran . Concentration on a few traditional

designs , repeated with minor m odifications has led to

saturation . Some of the designs are found to be

complicated and interwoven which are not to the tastes

32o f consumers.

Carpet manufacturers should try to introduce more

designs based on exact copies o f old and antique persian

carpets. These designs need to be collected and cod ified .

Efforts should be made to id e n tify traditional designs

from museums and wealthy collectors. Innovations in

designs should be subject to some aesthetic control and

31. EAG, "Kashmir Handicrafts: An Export Marketing Study" Volume I . Economists Advisory Group,London ( 1977) P . 7 .

32. I IF T , “Market Opportunities for Handicrafts o f Jammu and Kashmir" Indian In st itu te of Foreign Trade, New D elh i (1983) P . 6.

175

the p ractice o f making crude combinations o f old and

33new designs may be avoided,,

I I I . Colour Combinations

Eco . Advisory Group, Lon don .reports that great

importance i s attached to colours by customers which

is more important than designs. Colours are seen as

the single most important factor determining the

saleaBjlity o f Kashmir Carpets.

The Indian In st itu te of Foreign Trade, New

D elh i (IIF T ) market survey reveals that floor coverings

should harmonize with the colour scheme 0 f interio r

decoration . There is a clear d istaste for strong

contrasts in the colours o f oriental carpets. The

carpets produced in Kashmir have too many colours and

these are generally felt too loud. There is a tendency

to use bright pink, green, orange and golden yellow,

which make a fine quality carpet unsaleable in the

34European market.

Customers generally l ik e the graded transition

in colour to n alities progressing from the lorder to the

centre o f a carpet and vice-versa. Besides,

33. Op-Cit. P . 10.

34. I b i d . P . 11.

176

colour preferences vary from country to country, depending

upon the clim ate, cultural background and general taste

of the people. Hence, there is need for developing

d ifferent colour combinations for different markets.

The tab le given below shows the country~wise colour

preferences o f carpets.

Country~wise Colour Preferences o f Carpets

Country

U .K .

Switzerland

Colour Preferences

Aust ria

It a ly

Sweden

Norway

D enmark

U S A

Canada

A u stra llia

West Germany

Light colours and pastal shades

Very bright or very dark colours are less and less sought a fter . Taste is developing in favour o f soft pastal shades.

Blue, beige and Red base, Dark colours.

Soft and natural colours.

Bright colours, yellow collonrs ignored.

Red and rust colours, Green and Blue.

Deep and warm colours.

Pastal colours - ivary , beige , ligh t blue etc.

Pastel colours such as ivary green, beige etc.

Gold, blue , green and red.

Red, beige, rome blues and greens are accept abl e.

Sources: 1. ITC , "Major Markets for Handknotted Carpets" 1981.-. 2#i H F T , "Market Opportunities for Handi­crafts of J & K " ;3 . T IFT7 "fcxport Potential Survey o f J&K" 1977,

177

I V * Qual it y o f Weaving and density o f knots:

The quality of weaving o f Kashmir carpets is

generally found to be good. Some customers even rank

35it at par with that o f Ira n . However, others feel

that the fin a l effect o f Kashmir carpet is sometimes

too m athem atically correct, almost lik e a machine made

36rug. Besides the use o f only one type of knot i . e .

Persian knot produces monotony as compared with Iran i

37carpets. The mass use o f so called 'double knot' by

the carpet weavers in Kashmir has deteriorated the

weaving quality ;

The quality and fineness of carpet is also

judged by the closeness o f knots, that is the number o f

knots per square inch/m etre o f a carpet. Closeness o f

knot provides sturdiness to carpets and increases th e ir

span o f l i f e . On this score, Kashmir carpets belong to

the superior quality group o f carpets. The average density

o f knots for Kashmiri carpets is 364 per square inch

(1 8 x 1 8 ) . However, it has been observed that most o f the

customers give only secondary importance to the number

o f knots per square inch as a characteristic o f q u a l it y .

35. Op. C it . P . 6.

36. EAG, "Kashmir Handicrafts: An Export Marketing Study" Volume I , 1977, P . 6.

37 . I b i d P . 7 .

178

Therefore, excessive stress on the density o f knots as

the single indicator o f quality , should be replaced by

a comprehensive concept o f quality , including a number

38o f ch aracteristics .

V. F in ish in g

D esp ite superior workmanship, as compared to

other suppliers, Kashmiri carpets lack in good f in is h .

IIF T observed during the course o f its survey that

P a k ista n i carpets, Turkish carpets and even carpets

produced from other parts o f In d ia p a r t ic u l a r l y

Badohoi and Mirzapur) have superior fin is h . Kashmir

lacks in fin ish ing fa c il it ie s in terms o f washing,

clipp ing and p en cillin g . Mention may also be made about

39uneven absorption of dyes with the wool. There is no

drying fa c il it y which is very essential during rainy

season and winter.

For ensujring a better f in is h , the carpet

manufacturers s ’nould use wooden cleaning tools instead

o f metal tools. Better washing would improve the sheen

o f the woollen carpets and reduce the amount o f damage

to the p ile . The c lipp ing could also b e made more even

by using electric rotary clippers. Attention may also

38. O p .C it P . 6.

39. I IF T , "Marfor Markets for Handicrafts of Jammu and

Kashmir" P . 12.

179

be given towards improving the dyeing process. The

Government may consider taking help o f an expert for

40providing advice on improved method o f dyeing.

Quality Control

The above analysis reveals that there are several

bottlenecks in the product characteristics o f Kashmiri

carpets in the light o f demand requirements o f prospective

customers. I t i s , therefore, essential that the

manufacturers- exporters should formulate an e ffective

product strategy and give- necessary importance to each

and every element o f the product, like quality o f raw

m aterials , designs, colours, fin i shing, knots etc. They

should also develop a long term strategy for upgrading

the quality o f carpets in general.

The Government and the service institutio ns

should also provide necessary assistance to the carpet

manufacturers-exporters in their efforts to improve the

quality o f carpets . Su itab le provision may be made for

rigorous quality control at the place o f manufacture

in order to check m alpractices.

Exports o f Kashmir carpets are not subject to

compulsory export inspection except in case o f s ilk

40 . Op. C i t .

carpets. It is suggested that exports o f all carpets

are brought under the purview o f compulsory export

inspection,, Further, the quality M ark- in g Scheme as is in

existence in other states may also be introduced in

J&K by the State Government under which a quality marking41

centre be established with suitable s ta ff . The main

job o f the centre w ill be to give the quality c ertifica tes

after having checked number o f knots, design, fastness

o f colours and the type o f yarn as la id down in the

export c o n t r a c t .^ /

PROMOTIONAL MIX STRATEGY

Promotional mix is an important and integral

part o f marketing strategy for a product. Under monopolis­

t ic competition, with product d iffe ren tia tio n , market

segmentation, incomplete market information and

buying behaviour o f customers the need for and singifi-

cance o f promotional activ ities begs no description .

"Promotion consists o f those a ctiv it ies that

are designed to bring a com pany 's /industry 's goods or

, 4 2services to the favourable attention of customers.'

These a ctiv ities m ainly include advertising , sales

41. I1FT , "Export Potential Survey o f Jammu and Kashmir" Volume I, Indian In stitu te o f F o r e i g n Trade,New D elh i (1977) P . 19 23.

42. M o R . E. "Marketing and D istribution" McGraw- H ill Company, New York 19 68) P . 368.

181

promotion, personal selling and pub lic ity . Often times

a su itable blend q f all these becomes necessary, for

any one o f these may not serve the purpose fu lly in

view of the w idely d iffe r in g nature o f products and

markets. This blend is called the promotional mix.

Carpet industry in J and K State is an

export-oriented industry . I t caters to the needs o f a

h ig h ly dynamic and complex market in the world i . e .

developed countries. Therefore, a pursuasive promotion

mix strategy is a must to boost up carpet exports from

the State . In the following lines an effort has been

made to analyse the advertising and the sales promotion

efforts made by the individual carpet exporters and

other trade promotion organisation and to suggest

su itable measures to improve them.

Role o f Advertising in Kashmir Carpets

Advertising is one of the most important

elements o f a Promotional M ix Strategy. I t has been

regarded as salesmanship without a personal salesman.

Advertising is a nonpersonal sales message, which

promotes products# services or the company's image

which is paid for an iden tified sponsor and which is

43d irected towards a mass audience. I t s broad

o b jectiv es are to inform, to persuade and t0 rewind

43. 0 p o C i t . P . 381.

182

the target customers a.bout the product and the firm .

P u b lic ity and promotion olay a v ital role in

the bu ilding up o f export markets. One o f the reasons

for in s ig n ifican t export performance o f Kashmir carnets

is due to inadequate exposure in the international

markets. It has been reported that most of the carpet

exporters have no arrangements for advertising their

products and firms in the overseas markets. There are

obvious reasons responsible for the same. The advertising

is h ig h ly expensive in the western countries and the

market is goo graphically so d iv ers ified that it may not

be po ssible for the individual exporter to undertake

the advertising of th e ir products in each and every

country.

However, it is disappointing to note that even

the various Government sponsored organizations concerned

with the marketing o f Kashmir carpets do not pay proper

attention to the . advertising aspect of the industry.

The Government o f Jammu and Kashmir w ill have to lay

special emphasis on th is aspect and should bu ild up an

e ffectiv e promotional compaign at various stages. What

is needed for promoting exports at this stage, besides

marketing factors l ik e m odification in designs, colour

.183

schemes etc. is the proper exposition of the Kashmir

44Carpets a b r o a d .' The following suggestions in this

regard merit consideration .

1 • P u b licatio n o f a Brochure

To start with, attractive and s c ie n t ific a lly

developed catalogues and folders provide an effective

way o f advertising* There is a Complete dearth o f such

folders and catalogues in the carpet industry of Kashmir.

The Pakistanee carpet exporters have already taken a

lead in this sphere. It has been reported that their

catalogues and folders are h ighly attractive and

modern in terms o f layout, printing and message.

I t i s , therefore, suggested that the J and K

Handicrafts Corporation should prepare attractive

coloured brochures, with a comprehensive description

o f Kashmir carpets. This should include hi story, name

and o r ig in o f designs, basic Colours sizes , m anufac­

turing processes and other special features. The

brochures should contain good colour photographs o f

various carpets. The brochure may be sent to Indian

m issions abroad, for transmission to importers, depart­

mental stores, boutiques, importers associations etc.

44. I IF T , "Major Markets for Handicrafts o f Jammu and

Kashmir" (198 3) P . 16.

184

W ithin the country these brochures can be made available

to the buying o ffic e s and agents o f foreign importing

o rg an izatio n s .

Advertisements in Trade Journals

There .are several international trade journals

which exclusively deal with the promotion o f oriental

carpets . These journals provide an important media of

advertising for individual exporters because their reade

ship constitutes a large number of the prospective buyer

However, it has been observed during the course o f the

survey that our exporters do not fu l ly u t i l iz e th is

m edia. I t seems that the exporters Lack the modern

concepts o f aggressive marketing. Therefore, it is

suggested that the exporters should pay greater attentio

to th is aspect. The names of few reputed international

journals on carpets are mentioned below.

Imptex (West Germany)

H ali International Carpet Journal (U .K . )

Carpet-e-World (Ind ia )

Collaboration with the Importers and Exporters o f Other countries

For launching a m assive advertising compaign

for o riental carpets the exporters and the various

185

Government organizations, related to the trade should

explore the p o ss ib ilit ie s o f collaborating with the

carpet importers and exporters o f other countries for

advertising of oriental carpets on T . Vis o f buying

countries.

SALES PROMOTION

Sales promotion includes all a ctiv ities in the

promotion process except advertising , p u b lic ity and

personal selling . Among the most important o f sales

promotion a ctiv ities are premiums, contests, product

samples, exhibits, container promotion, price oriented

45promotion, market tours and visual m erchandising.

The present study r e ^ a l s that the carpet

industry in Kashmir does not fu lly u t il is e these methods

o f sales promotion. Although few o f the exporters have

started participating in international fa irs and under,

taking market tours, but due to financial lim itations

and other d ifficu lties# most of the exporters do not find

themselves in a position to participate in these a ctiv i­

t ie s . The following suggestions in th is regard may

prove useful in th is context.

45 . Mason, R .E . "M arketing and D istr ib u tio n " McGraw H ill Ebok C0 . New York (1968k P . 411.

186

Partic ip atio n in Exhibitions and Fairs

The Trade Fair Authority o f In d ia organises

a large number o f Indian exhibitions and particiipation

in international trade fa ir s . The j and ¥ Handicrafts

Corporation should make it a point to participate in

these exhibitions and fa irs since they serve as the

spring board for generating export business . The

brochures can be distributed during the participation

in these fa irs and ex h ib itio n s . Participation w ill also

help in assessing the requirements o f the markets in

terms of the product, design, colour etc. which can be

e ffec t iv e ly u t ilis e d for getting export production

o rganized .

There is now a growing consciousness and

desire among carpet exporters to participate in trade

fa irs abroad. But due to financial lim itations, it is

only the rich manufacturers and exporters who can and

are w illin g to afford t h is . There are a number o f

International Trade F a irs specialising in carpets and

floor coverings. Famous among them are 'H eim textile"

which is held every year in January in Frankfurt,

Germany, " In fe x ' held in Brighton, Great Britain ,

'In te rd e c o r ' held in Netherlands and 'O rte fa ' in

46Sw itzerland .

~46~. Lange, J . T. "In d ia s Carpet Industry" Dev lopment and Prospects" IPrentice Hall o f In d ia , Private Lim ited , New D elh i '1 9 83 ) P . 43.

187

In order to make participation open to all

m anufacturers, it is suggested that the Government

extends financial assistance to small and medium scale

m anufacturers/exporters in Kashmir.

Buyer-Sel1 er Meet at Srin agar

Another way o f sales promotion could be the

convening o f carpet exhibitions/Buyer- seller meets

every year at Srinagar. This w ill provide a chance to

the prospective importers to v is it the valley and to

purchase the required type o f carpets. However, the

said exhibition should be planned well in advance and

it should be given proper publicity , so that maximum

number o f importers are persuaded to attend such an

exh ibition . The timings o f the exhibition should be

fixed in such a way that on the one hand, maximum

number o f importers are xvilling to attend at that time

and on the other the best possible selection of the

carpets manufactured in the valley are available . This

is po ssible only when the various Government agencies

and the dealers work in a coordinated manner, It w ill

be better , i f th is task is undertaken by the Association

of Kashmir Carpet Manufacturers and Exporters, as is

the practice in Mirzapur-Bhadohi and Pakistans where such

exhibitions have become permanent annual features o f

188

the industry . Pakistani carpet manufacturers and

exporters regularly convene a three day carpet E x h ib i­

tion every year at Lahore. More than 50 importers

from d iffe ren t countries participated in the Carpet

47F a ir , recently held at Lahore in the year 198 4. Such

an example is worth emulating.

Market T0 urs and Contact Promotion "Programme (Cpp)

At present, Indian carpet exporters depend

prim arily on person-to-person contact in promoting

theitr exports. A few Indian exporters make o cc as 'Io n al

trip s abroad but th e ir so called sales promotion trip s

aace not iwall planned. There i s need, therefore,

for a concerted promotion o f Indian carpets as a whole

and Kashmir carpets in particular on the part o f concerned

Government agencies. These agencies should p erio d ically

arrange the market tours and contact promotion programmes,

in which due representation should be given to small

and medium sized- extorters and manufacturers from the

State .

f,MiRKETl1s!G RESEARCH

The dynamic nature o f marketing a c tiv it ies

47. For d eta ils , see the Weekly Pakistan and Gulf Eco­nomist" Karachi, Pakistan March 10-16, 1984 issue .

189

requires that manufacturers and middlemen make decisions

on a variety o f problems almost continuously. These

decisions should be based on adequate, tim ely and pertinent

inform ation. "ffre than ever before marketing policies

are being formulated and marketing decisions made on

40the firm foundation o f sc ien tific research. This

research furnishes therfactual information, which whe©

properly evaluated enables the marketing executive to

take e ffectiv e action to achieve desired ob jectives .

Marketing research has been defined as the

"system atic , objective and exhaustive search for and

study o f facts relating to any problem in the f ie ld o f

49m arketing.

As a result o f th is study, it has been observed

that most o f the carp t manufacturers and Exporters

in the State of Jammu and Kashmir, do not have any

systematic and reliable arrangement o f gathering,

analysing and interpreting the information and data

relating to the marketing of their products. They

usually depend on the casual t it b its o f information

48. P h i l l ip s , C .F . "M arketing P r in c ip les and Methods" Richard D . Irw in In c , (i l l in io s ) 1968, P . 547 .

49. C r is p , R. D . "Marketing Research Organisation and Operations" (New York 'AMA' 19 5 8 ) .

190

received from their importers or through th eir personal

v is it s . Naturally , the complete and correct information

about the d ifferen t world m.arkets is not available to

than. Consequently, our exporters and manufacturers are

not in a position to cater to the needs o f the markets

in a better way. The main reason responsible for th is

situation is the in a b il it y of the exporters to undertake

export marketing research, because the cost of research

is generally beyond their financial resources.

studies have been conducted. For instance in 1977, EAG,

London conducted a market study entitled "Kashmir Handi­

crafts ; An Export Marketing Study" on behalf o f the

Government o f Jammu and Kashmir and sponsored by the

Commonwealth Fund For Technical Cooperation (CFTC) . The

COfindingyo f th is study are contained in five volumes.

Recently, the Indian In st itu te o f Foreign Trade,

New D elh i in Association with the Commonwealth Secretariat

London and Directorate o f Handicrafts, Jammu and Kashmir

50. SAG, "Kashmir Handicrafts : An Export Marketing Study" Volume I- IV Economists Advisory Group, London ( 1 97 7 ).

Surveys for Kashmir Carpets

However, at the Government level a few market

191

organised a Market study T0 ur for select handicrafts

of Jammu and Kashmir in United Kingdork, Belgium,

Netherlands, West Germany and Prance. The finding o f

th is study contained in the report entitled "Market

Opportunities for Handicrafts of Jammu and Kashmir"

provide valuable market information regarding Kashmir

51carpets .

But in sp ite o f these studies, the need for

market in telligen ce has not been fu lf il le d e ffectiv ely ,

because these studies suffer from the following

lim itatio ns .

i . These studies Cbver a number o f handicrafts

items and carpet is only one of such itq-ns.

Hence they lack indepth study o f carpets.

i i . Only two such studies have been conducted

t i l l now. Therefore upto date information

is not available on continuous b a s is .

i i i . The find ings o f these studies are not made

available t0 all the exporters and

manufacturers o f the State, in an

ahLe.understand form. These valuable reports

generally remain confined to few Government

________ _ o f f ic ia l s .

51 . I IF T , "Major Markets fo r Handicrafts o f J&K"In d ia n In st itu te o f Foreign Trade, New Delhi (1 9 8 3 ) .

192

To overcome the ahove lim itations , following

suggestions are put forward.

Establishment o f Market information Cell

I t is strongly recommended that the D irectorate

o f Handicrafts, Jammu and Kashmir should set up a

Market In te llig e n c e C e l l . This information cell should

be made a focal point in the State to render useful

and tim ely services to the exporting community.

The information wing should actively engage

i t s e l f in assisting the industry in developing exports.

Accordingly it should provide information on (i ) potential

markets ( i i ) competing countries ( i i i ) specific market

requirements in terms o f quality specifications , designs

colours, packaging (iv) contact points and channels

o f distribution (v) trade regulations in the country and

abroad (v i) exchange regulations (v ii) t a r if f and non­

t a r if f barriers (v i i i ) f a c i l it ie s and incentives

available to exporters (ix ) procedures and documentation

(x) national and international trade fa irs and

exh ib itio n s and (x i) shipping and forwarding agents.

The inform ation wing should continuously

m onitor foreign market developments in terms o f market

characteristics , prices and d istrib u tio n channels. The

193

cell should m aintain close links with various organiza­

tions both w ithin the country and abroad. It should have

close liason with the Indian In st itu te o f Foreign trade,

Trade Development Authority o f In d ia , Handicrafts and

Handiooms Export Corporation o f In d ia , Federation of

Indian Exporters ©rganination, Carpet Ex-oort Promotion

Council o f In d ia etc. for e lic it in g available information

on export market. In overseas countries, the cell should

m aintain close contacts with Indian Trade Centre o f

B russils , Importers Association and Design In stitu tes

in various countries. The information collected should

be properly documented and disseminated to various

m anufacturers and exporters in the State .

Stationing o f In d u stry 's Representative Abroad

I t is felt necessary that there is a need t0

post a person abroad preferably in London or Hamburg

with intim ate knowledge o f Kashmir carpets. This w ill

a ss ist in establishing a close liason between the Kashmir

exporters and the European importers in building up

confidence in the la tter . The main functions o f the

representative WDUld be to collect and dissem inate

market intelligen ce regarding prices, imports from

other countries, market trends and reguirements in

terms o f designs, colour combinations, technological

advances made in the vorld carpet industry and export

regulationsof these countries.

194

Market Exploration Studies

Presently exports o f carpets from Jammu and

Kashmir are directed m ainly to West Germany, USA and

some other countries in Western Europe. This over­

dependence on a few markets has been one o f the lim itin g

factors in expansion o f exports, Thi's focusses attention

on the need for market d iv ersificatio n for export

consolidation and growth.Expansion o f exports w ill

greatly depend on exploration o f new o u tlets . The nev;

markets that are worth exploring may include Saudi

Arabia, Kauwait, United Arab Emiretes, Japan etc.

studies need to be conducted in these countries to

acquire knowledge about the specific requirements of

the buyers in terms o f designs ,colours, specifications ,

s izes , quality etc. for formulation of an export

marketing strategy.

export marketing strategy for Kashmir carpets is

ensuring price competitivsness in the wQ rld markets.

The basic point to be noted in this context is that

for carpet o f any given quality , price quoted for it

In th is connection, it is suggested that indepth

Another important element of an effective

195

should, in relation to the price regarded as reasonable

for i t , neither be too high, which repels prospective

buyers, nor too low, which gives the impression of a

cheap quality .

However, quoting o f com petitive prices by the

carpet exporters of Kashmir depends on the a v a ila b ility

of carpet yarn, dyes, chemicals for washing etc. at

international prices . Besides the wages constitute th e

single most important component o f the cost o f a carpet.

I t has been observed that the Kashmir carpets are not

p r ice competitive in general. Hence suitable steps should

be taken, for ensuring adequate supplies o f raw m aterials

to the industry at reasonable prices.

The a v a ila b ility of an adequate amount of

fcredife also plays an important role in the above process,

as the carpet industry is a working capital intensive

industry , with wages and raw material accounting for more

than 80 percent o f the total cost o f production of

a carp t .

Another important aspect o f pricing strategy

is to avoid the severe inter-se-competition among the

carpet exporters, which results in lower unit value

realisation for our carpet exporters. Such unhealthy

practices could be avoided by fix in g floor prices for

carpets on one hand and making periodic checks on

prices paid to Kashmiri carpets in selected overseas

markets on the other . The price checks can be carried

out through organizations like Trade Development Autho­

rity o f In d ia or through the commercial staff attached

to our onbassies in these countries, which w ill form

the basis for an aporDpriate corrective action.

From the point o f view of Kashmir carpets

industry, the gaps in export market created by I r a n 's

withdrawal presents it w ith an enormous and valuable

opportunity, because after Iran , Kashmir and Turkey

are the only places in the world which produce superior

quality hand-knotted s ilk carpets. However, the eertent

t0 which Kashmir c0 uld capture the market depends

b a s ic a lly upon the price-quality relationship o f its

carpets visa-vis that o f other countries lik e Pakistan ,

I ran and Turkey.

I t j„s in this connection that 0 ne should note

the statements o f many foreign buyers that Kashmir carpets

were rather disproportionately more expensive compared

52to Pakistani carpets. The main factor held responsible

5 2. I IF T , "Market Opportunities for Handicrafts of Jammu and Kashmir" Ind ian In st itu te o f Foreign

Trade, New Delhi (1983) P . 6.

196

197

for th is is the increase in the wages o f Kashmiri

weavers which went up by about 300 per cent during

1971-7 2 to 1975-76 as against an increase o f 55 percent

in the wages o f Pakistani weavers during the same

. ^ 53period . As wages account for a major share o f the c0 st

o f production o f carpets, there must be a good deal o f

truth in th is observation. Sim ilarly Kashmir carpets

are also gradually facing competition from the M irzapur

Bhadohi carpets, which are cheaper in price due to th e ir

lower wage,-, gates and even the cost o f raw material

used. At present a price d iffe ren tia l o f about 3o percent

is necessary to persuade the buyer o f a f in e oriental

carpet to choose a Kashmiri rather than an Iran i p iece ,

all other characteristics being equal.

SDELI W R Y SCHEDULES:

I t is necessary to ensure ' strict adherence

to the delivery schedules committed td the importers in

overseas markets, i f any exporter has to retain h is

customers or to increase their number. No customer Who

gets irregular supplies from an exporter can be expected

to patronize him for long except in the most

unavoidable circumstances.

5 3. ITCO, "Carpet Weaving Jammu and Kashmir" J&KIn du stria l and Technical Consultancy Organization ,

Jammu (1979) P . 159.

138

Generally speaking Kashmiri exporters are

able to meet the delivery schedulesof their importers.

Some d if f ic u lt ie s were faced by the exporters during

the loom period o f 1979^80, on th is account, due to

5 4the lim ited number 0 f weavers available at that time.

But now that problem has been overcome. Kashmiri carpet

exporters are in a better position to f u l f i l the delivery

schedules of their buyers. This is in quite contrast

with the Mirzapur-Bhadohi carpet exporters who frequently

55fa il to meet the delivery schedules of their customers.

The factors favourable to Kashmiri exporters are:

i) most of the orders are based on the

'on the s^ot' selection o f carpets by

im porters/buyers and

i i ) almost all the consignments are transfe^tl

by the air-transport and hence lot o f tim e

is saved on that account,

U j a r e h o u s in g f a c i l i t i e s

The importance o f warehousing fa c il it ie s o f

a required magnitude in the importing countries should

54. Based on f ie ld investigations.

55 . Impression gained from importers interviews published in the C arpet-e-world5 Volume VI, 198 4.

139

be appreciated for its immense value in enabling the

exporters to meet their delivery schedules. Adequate

stocks o f popular varieties o f carpets and those

demanded often , i f stored in warehouse located in

importing countries, would enable tim ely delivery o f

the required items to the buyers. Hence, there should

be a warehouse in each o f the principal importing

countries for stocking carpets, may be alongwith other

handicraft items.

There are already such fa c il it ie s available in

some of the importing Countries. Handicrafts and Hand-

looms Export Corporation o f In d ia (HHEC) o ffe rs ware­

housing fa c il it ie s tD exporters o f woollen carpets to

West Germany at nominal service charges and m aintains

it s own warehouses in New York and Paris for stocking

56and selling its own mecbhandise.

The warehousing fa c i l it ie s in West Germany

relate to the Carpet Warehousing Depot set up by i t in

hamburg in 19 65 for assisting among others, the carpet

exporters. The Depot assists in a) booking direct whole

sale orders on behalf o f exporters and y) receiving

the goods o f a consortium a ffilia te d to i t , storing

them in the warehouse and selling them on behalf o f

56 . ITCO/ “Carpet Weaving in Jammu and Kashmir" 1979

P . 161.

200

the members at prices fixed by the members themselves.

The warehouses o f HHBC m New York and P a r is

are adjuncts to its operation o f it s Sona Stores.

These warehouses feed the Sona Shoos with tim ely stocks

o f various items o f sale, in addition to stocking

merchandise for selling i t o f f the shelf to w h o lesal ers.

However, most traders interviewed in Srinagar

fe lt that routing trade through HHEC was time consuming,

resulted in blocked capital and involved too high a

service charge (2% o f exports).

An effective carpet export strategy should

therefo re ̂ aim at creating warehousing fa c il it ie s for

stocking carpets for sale within short notice, especia­

l l y in important market. This task should be preferably

assigned to Jammu and Kashmir Handicrafts (Export and

Sales) C0 rnoration (JKHC).

''EXPORT INCENTIVES FOR KASHMIR CARPETS

In order to promote exports at a sustained

and steady pace the Government o f In d ia has offered

57. dp- Cit. P . 161.

58. I b i d . P . 161 .

57

201

a number c f incentive schemes to exporters to make

export products competitive in the international markets

In their efforts to d iv ersify the export trade, manufac­

turers are assisted by im port. licensing to meet the

requirements o f imported raw m aterials for production,

the allocation o f indegenous raw m aterials , fiscal

rebates, cash assistance on selected products, credit

60fa c i l i t ie s and so on .

The carpet exporters in Jammu and Kashmir are

entitled to a ntirmber o f export incentives as mentioned

above. However, in the following pages a b r ie f examina­

tion o f the three main incentives w ill be made, v iz*

i) Cash Compensatory Support

i i ) Import Replishment Licence

i i i ) Export Credit

ash Compensatory Support

The schane o f cash compensatory support has

been extended by the Government o f In d ia to certain

selected products to enable them to withstand competitive

conditions in the export market. The quantum o f cash

59

59. Balagopal, T .A .S . , "Export Management" Himalaya ■Publishing House (Bombay 198 0) P . 18 4.

60 . Rathore, B .S . "Export Marketing" Himalaya P ublish in g House, (Bombay: 198 3) V . 7 4.

2 02

assistance is usually calculated as a percentage o f

the net f .o .b . value.

The hand-knotted carpet industry is also one

o f the industries which has been selected for the

purpose o f awarding this incentives. Following are the

rates o f cash compensatory support applicable to carpet

exports at present:

i ) 10 percent o f the F .O .B . Export Price

o f S ilk carpets.

i i ) 17 percent o f the F .O .B . Export Price

of woollen carpets.

The cash assistance on s ilk carpet exports has

been allowed only recently, after much pursuation oil the

part of the local manufacturers and exporters. Obviously

the rate 0 f incentive on s ilk carpets is much lower than

woollen carpets. As Kashmir manufacturers export

m ainly s ilk carpets at present, therefore it is fe lt

that the rate of incentive should be enhanced from 10

percent to at least 15 percent in respect o f s ilk

carpets.

The cash assistance 0 n woollen carpet exports

has been reduced from 20 percent to 17 percent. I t is

203

'suggested that the d ifferent incentive rates should

be fixed for d ifferen t quality categories so that

carpets o f higher knot density receive more incentive*

Besides, the form alities required for claim ing the

cash assistance are complicated and time consuming.

Hence the same s ’nould be sim plified so that cash

assistance is provided to the exporters without any

del ay.

•̂ epllshm ent Licences

To cover the import requirements of few

specified export industires, the registered exporters

are alloted import entitlement for import content, in

the manufacturing process, required for the export

product. Carpet industry is also covered by this

scheme. Following are the replishment rates applicable

to th is industry.

I ) 40% of the F .O .B . price of the s ilk carp'ets.

I I ) 20% o f the f .O .B . p r ic e of the Vfoollen carpets

These incentives can prove h ighly b eneficial

for th is industry . Carpet industry in Kashmir i s badly

in need o f the imported raw material lik e silk and w o l ,

in order to compete with the carpets from ’Pakistan and

China etc. However, it has been observed that most o f

204

the carpet m anufacturers/exporters do not u t il is e the

replishment licence for the purpose for which these

are issued by the Government. It has been estimated

that about 95% o f carpet exporters/manufacturers

transfer these licences against some premium to the

61importers from other parts of In d ia .

Carpet manufacturers are o f the opinion that

they can not import the raw m aterials from foreign

countries against their licences because it is not

economical for them to import small quantities . This

problem could be solved, i f instead o f issu ing the

licences tQ individual exporters, the Government would

authorise the Small Scale Industrial Development

Corporation (SlDCo) of Jammu and Kashmir State to

import the required, raw material in bulk and then

d istrib u te the same among the exporter/manufacturers

on quota b asis .

■H sXPORT CREDIT

Export Credit refers to credit extended to the

exporters for financing the export transactions. It in ­

cludes any loan to an exporter for financing the purchase

procuring, manufacturing or packing o f goods meant fo r

61. Inform ation based on f ie ld investigatio ns .

205

overseas markets,, Following are some o f the types of

export credit fa c il it ie s provided to the exporters by

various commercial Banks„

i ) Pre-shipment finance/packing credit

i i ) Post-shipment cred.it

i i i ) Medium and Long Term Credit

These loans are provided at a re latively

concessional rates of interest to the carpet exporters.

I t was revealed by the survey that most o f the carpet

m anufacturers/exporters in Kashmir avail o f these

f a c i l i t ie s . However, when compared tQ the export credit

fa c il it ie s provided, by Pakistan Government to its

carpet exporters, the fa c il it ie s seem to be inadequate.

According to ITC report, credit under the Export

Refinancing Scheme is allowed to carpet exporters in

Pakistan by commercial banks, at extremely concessional

rates i . e , 3 percent against Letters o f C redit o r firm

62orders. VJhileas in India# the minimum rate o f interest

charged- Qn such loans is 8 percent per annum. Therefore,

the need for lowering down o f interest rates on export

finance is strongly recommended.

62 . ITC , "Major Markets f0 r Handknotted. carpets" Volume 5, International Trade Centre, Geneva

(1981) P . 51 .

208

Role o f ECgC

Export Credit and Guarantee Corporation of

In d ia plays an important role in the fie ld through

it s various po lic ies and guarantees providing cover

for Commercial and po litical risks involved in export

trade , it is not a lending in s t itu tio n ; export finance

comes through the commercial banks. But ECgC ' s po licies

and guarantees are collateral o f security to the

exporter as well as the banker. They make it easier for

the exporter to obtain through the banking system the

finances that they require.

ECGC issues a variety o f commercial and

p o lit ic a l risks . The main commercial risks covered are

the insolvency o f the overseas buyer and hi s protracted

default tQ pay for the goods accepted by him. War,

insurrection , sudden import restrictions and embargos

on remittances from abroad are some of the p o litical

risks covered.

It has been observed that most o f the carpet

importers in Jammu and Kashmir are unaware of the

s ign ificant role which the ECGC plays in the promotion

o f the export trade . This is also indicated by the fact

that only small number o f exporters have contacted

207

ECGC * s local o f f ic e during the last about tw^ years.

I t is therefore, suggested that the carpet exporters

o f Kashmir should be made to realiz-e the role and func­

tions of ECGC. For th is purpose the SCgC authorities

should launch a p u b lic ity comnaian in tha State.

Com plicated Nature pf Expo rt P rocedures

It was generally reported by most o f the

exporters that the present export procedures and p o l i ­

cies o f the Government o f In d ia are h ighly complicated,

cumbersome and time consuming. There is lot o f paper

work and o f f ic ia l routine involved in the export proce­

dures. This acts as a discouraging factor for new

exporters. The following instance illu strates the

complicated nature o f export procedures.

The cash incentive on export 0 f s ilk carpets

is being given by the Controller o f Imports and Exports,

on ly when it is proved that the intention o f the foreign

buyer is resale o f the carpets purchased by him. In

case o f woollen carpets, the controller is satisfied

with the bulk and quantity of the carpets sold. But

gvery strongly in case of.: s ilk carpets, the exporters,

are being advised by the concerned agency t0 procure

the mail written order Gn the letter head o f the

foreign buyer under h is seal and signature to prove

208

that the sales have not been affected to the foreign

tourists v is it in g valley .

The authorities are completely in know of th e

fact that the buyer . : comes personally to Kashmir on

a buying trip and physically selectes the goods, signs

the order form of the exporter. He feels it very

inconvenient t0 type out the order in h is Country on

h is own letter head and to senfl it back to the exporter

Besides, th is practice is not prevailin g in other oarts

o f In d ia , as silk carpets are extorted only from Kashmir

w ithin In d ia , therefore it becomes very d if f ic u lt for

Kashmiri exporter t0 make the customer understand the

purpose o f such an order. Moreover there is n0 reason

why h is order on spot given in Kashmir should not be

accepted as genuine even though it may be on plain paper

The above example clearly shows the complicated

and irrational nature o f export rules and regulations.

I t i s , therefore, suggested that the Government o f

In d ia should sim plify the export procedures to the

m aximum po ssi b le ext ent.

In th is connection the Government o f Jammu and

Kashmir has done a commendable job fey at least bringing

a ll the agencies/organisations involved in the export