Column Clothes for employment

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: The textile industry in India, which grew at an impressive 30% plus per annum (1987-92) with a peak growth rate of 53.5% in 1989-90 against all odds, attracted the attention of economists and researchers during the last quarter of the 20th century. In the 1980s and 1990s, a host of researchers studied this industry, especially on the losses for India on account of the imposition of quantitative limits on textile & clothing (T&C) items by developed countries who were signatories of the multi-fibre agreement (MFA). There were also studies that focused on suggesting measures for realising the available quota, identifying the affected T&C categories, and so on. Many of these research findings emphasised the need for ending protectionist measures, dismantling of the MFA and the eventual integration of the MFA-guided textile trade regime into the rule-based GATT/WTO. As aspired, T&C trade was liberalised from January 1, 2005.

The gains for India since the beginning of January 2005 from the international trade in T&C were not as much as expected. Term it the ‘adjustment process’ or blame it on the dollar exchange rate—whatever the reason, the realisations from this industry have not been as projected. An industry which contributed 25% of India’s total exports in 1987-88 is contributing less than 15% in 2007-08 whereas the share of exports in India’s GDP increased threefold from 4% to 12%. Though total exports from the country recorded more than satisfactory growth, the primary driver of growth in exports is not T&C. The export contribution of engineering goods has steadily risen from 10% to 25% from 1987-88 to 2007-08. Such changes in trade patterns were exhibited by China, South Korea, Taiwan and Hong Kong during 1980-1996.

There are also reports of firms/entrepreneurs exiting the industry as industry structure moves from fragmentation to consolidation. Is India then losing competitiveness in textile production and manufacturing?

The emergence of the clothing sector is primarily an offshoot of India’s low-cost country advantage, a spin-off of its large population. As per the current estimates, 90 million people are already employed in the sector and it is projected to provide employment to a few million more as there are industrial giants betting on this industry. Besides, there has been a proliferation in textile/apparel parks in the last few years, though there are also instances of lay-offs in the industry.