Another chance for India’s textile industry

• India’s textile industry has a long history of being a mainstay of the economy’s global trade linkages. It was, after all, the English East India Company’s focus on trade of cotton and silk from India that made it one of the richest and most powerful corporations in the 18th century. Today, India has the second largest manufacturing capacity in textiles globally and accounts for 13% of the world’s production of textile, fibre and yarn. However, it lags in terms of competitiveness and productivity.
• In this context, the special package of Rs.6,000 crore announced last week for boosting the textile industry is important for many reasons. After fully reaping the benefits of access to the markets of developed economies in the post-Uruguay Round world, China is beginning to exit the textiles and apparel sector due to rising domestic wages. This leaves a huge demand base for India to exploit as rightly recognized by the government.
• Rs.5,500 crore out of the Rs.6,000 crore package is for an additional 5% duty drawback for refunding state levies. It is expected that this step will boost exports, increase investment and make the textile industry an integral part of the Make in India programme.

Current situation of Textile in India

• India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to India’s exports with approximately 11 per cent of total exports. The textiles industry is also labour intensive and is one of the largest employers. The industry realised export earnings worth US$ 41.4 billion in 2014-15, a growth of 5.4 per cent, as per The Cotton Textiles Export Promotion Council (Texprocil). The textile industry has two broad segments. First, the unorganised sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organised sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale.
• The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion by 2021. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The Indian Textile Industry contributes approximately 5 per cent to India’s gross domestic product (GDP), and 14 per cent to overall Index of Industrial Production (IIP).

Analysis:

• The textile industry is the second largest employer in the country after agriculture; any allocation to it has a multiplier effect on the economy at large. According to an Assocham report, employment generated in the economy because of a rise of Rs.1 in demand of the industry, is more than 5 times the employment created in the sector itself.
• The government’s decision to incentivize textile and apparel firms to absorb more labour by offering to pay a portion of the Employees’ Provident Fund for new employees will further enhance this effect. Female labour force participation rate is also expected to increase from a boost to the textile industry.
• But if the textile and apparel industry has to become competitive at an international level, it needs a major revamp. The issues of productivity suffered by an industry largely restricted to the small scale and unorganized sectors needs to be addressed. Incidentally, around 60% of the spindles used in India are more than 25 years old.
• Vietnam and Bangladesh are already securing better terms for themselves via free trade agreements with major markets. India should start doing the same.
• The issues of productivity suffered by an industry largely restricted to the small scale and unorganized sectors needs to be addressed.
• The government should lay emphasis on promotion and marketing of textiles and designs that are indigenous to India.(take lessons from success of Fab India brand)
• Geographical indications could prove to be an effective means of securing a niche market for Indian handloom in foreign markets.
• e-commerce could also be used to the advantage of the textile industry—to eliminate layers of middlemen and improve access.
• To successfully reap the benefits of this opportunity, it is important to diversify and embrace new innovations.
• We should promoting traditional industries as well as the emerging industries based on synthetic fibre.
• It is expected that this package will boost exports, increase investment and make the textile industry an integral part of the Make in India programme.
• Any allocation to textiles sector will have a multiplier effect on the economy at large.

By: Vishal