A Study On Growth Of Textile Industries In India With Pre And Post Liberalization Period Mrs.S.Umamaheswari Research Scholar, Kamadhenu College of Arts and Science Mrs.R.Latha Assistant Professor KG College of Arts and Science Ms.R.Janani Assistant Professor KG College of Arts and Science Mrs.S.Malini Research Scholar, PKR College ABSTRACT India is the world s third largest producer of cotton and second largest producer of yarn and textiles. This industry was de-licensed in 1991-1992, which led to various structural changes in the industry. The present study aims to understand the impact of liberalization on the Indian textile industry by comparing the performance of the firms incorporated before liberalization and firms incorporated after liberalization in the industry. It also cover the Government initiated the integrated textile park to promote the textile industries. Key words: Textile industry, Post-Liberalization, Pre-Liberalization. INTRODUCTION TO THE INDUSTRY 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 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 textile industry employs about 40 million workers and 60 million indirectly. India's overall textile exports during FY 2015-16 stood at US$ 40 billion. The Indian textiles industry is extremely varied, with the hand-spun and hand-woven textiles sectors at one end of the spectrum, while the capital intensive sophisticated mills sector at the other end of the spectrum. The decentralised power looms/ hosiery and knitting sector form the largest component of the textiles sector. The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison to the industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world. LITERATURE REVIEW Aggarwal (2001) in his study pointed out that India s garment and textile exports were likely to face fresh challenges with phasing out of Multi fibre agreement by 2005, as well as several regional trade treaties, such as NAFTA(North American Free Trade Agreement). Banik and Bandopadhyay(2000) tried to examine Indian cotton textile industry in the wake of MFA phase out. The competitiveness of Indian textiles was measured by calculating RCA which is ratio of share of product in country s export to its share in world export and REC which is ratio of India s textile exports in world s textile exports to share of India s textiles in its total export. Also, ERP (effective rate of protection) was calculated and secondary data was taken for 21 years from1973-74 to 1993-94. It was found that with rise in competitiveness, exports would increase. With more protective regime, both competitiveness and production will fall. ISSN: 2393 9125 www.internationaljournalssrg.org Page 1
Bhandari and Maiti (2007) analysed the efficiency of Indian textile manufacturing firms by using Tran slog Stochastic Frontier Production functions at firm-level on India s textile firms and estimated technical efficiency of firms. They found that the average technical efficiency varied between 68-84 per cent across the select years and individual technical efficiencies vary with firmspecific characteristics such as size and age. Further, public sector firms are relatively less efficient during the post-labialization period. Chandra (1999) in his study pointed out that the Indian textile industry has Islands of Excellence but the capability and performance of average firm was not very high when compared to those in several other countries.the technology performances, stock and work practices in textile industry of India were outdated. There were distinct weaknesses in the structure of the industry. Its inherent strengths have to be built upon and new contemporary strengths needed to be added. Ganesh (2002) commented that the Indian textile industry was in a state of decay, if seen from the perspective of preparedness for the opening of the world textile market in 2005. Those not so concerned with the importance of loss in exports, would still need to consider the serious implications for local industry and employment when textile imports opened up further and import duties came down. For almost fifty years, government policy weighted scales against the organized sector including the state sector, first by limiting the growth of composite mills, and then by encouraging excise duty avoidance and evasion as the basis of building competitive advantage in the Indian market. Kumar (2001) remarked that textile industry witnessed positive growth during 1973-94 in capital stocks, output and capital output ratio, more so, in its woollen textile segment which was relatively stable in demand, domestic as well as international till the breakdown of East European Market. As expected, the capital efficiency in the industry was deteriorating over time as was reflected by rising capital output ratio. The pressure on industry to improve product quality at minimum price was likely to increase in near future owing to phasing out of MFA by 2005 under Uruguay Round of GATT (WTO). Pelzman (1984) examined effect on profitability of Textiles and Apparel for 29 textile and 33 apparel industries during the period 1969-79 by using multiple regression analysis. Pooled cross section, time series data for pre MFA- Multi fibre Agreement (1965-73) and post MFA (1974-79) has been taken. The variables taken were capital output ratio, concentration of manufacturing index, economies of scale, growth of industry demand, seller concentration ratio, ad valorem nominal tariff rate, import penetration index and MFA. It was found that MFA did in fact improve the profit performance of the protected textile and apparel sector. OBJECTIVES OF THE STUDY 1. To understand the market size of the industry 2. To identify the number of factories in pre and post liberalization period 3. To compare the employment growth opportunities in pre and post liberalization period 4. To understand the Government initiatives towards textile industries RESEARCH METHODOLOGY For the purpose of study of growth of textile industry of India, the secondary data are used. As definition point of view the term secondary data refers to the statistical material which is not originated by investigator himself but which he obtains from some one s records Generally a research design is a blue print of the research that is to be followed in completing the study. The research is descriptive in nature. The main goal of this research is to describe the data and characteristics about what is being studied. The data for this study is collected regarding the preliberalisation and post liberalisation conditions of the Indian textile industry. The data has been collected from reliable secondary sources like reference from various journals, news as well as website pertaining to textile industry, Annual Survey of Industries (ASI) published by Central Statistical Organisation (CSO), Government of India has been taken in order to ensure complete reliability Market size 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). ISSN: 2393 9125 www.internationaljournalssrg.org Page 2
The Indian textile industry has the potential to reach US$ 500 billion in size according to a study by Wazir Advisors and PCI Xylenes & Polyester. The growth implies domestic sales to rise to US$ 315 billion from currently US$ 68 billion. At the same time, exports are implied to increase to US$ 185 billion from approximately US$ 41 billion currently. Table No.2 NUMBER OF FACTORIES AND COMPOUND GROWTH RATE IN THE POST-LIBERALIZATION NUMBER OF FACTORIES IN PRE AND POST LIBERALIZATION PERIOD Table No.1 Number of Factories and Compound Growth Rate in the Pre-Liberalization Period (1980-81 to 1991-92) Among the five year period of the post-mfa regime, the year 2008-09 marked the maximum number of 24336 factories and the year 2005-06 with the minimum number 2of 2227 factories. Among the product group, the maximum number of factories of 36859 is recorded in the product group of Manufacturing of Cotton Spinning, Processing other than in Mills, Weaving and Finishing of Cotton Textiles on Handlooms (1711) and the minimum of 1917 factories in the product group of Manufacturing of Making of Blankets, Shawls, Carpets (1722). The CGR attained during the Post- MFA regime is 1.65 percent. The complete phasing out of MFA is a significant policy shift as far as Indian textile industry is concerned. It is clear from table 4.1 that there are wide fluctuations across the product group and year wise analysis. The maximum number of factories is 14612 in 1991-92 and the minimum number of 12329 units is in 1982-83. Among the product group, the maximum number of factories of 70687 is in the product group of Manufacturing of Cotton Spinning, Processing other than in Mills, Weaving and Finishing and minimum number of 1357 units in the product group of Manufacturing of Fabrics or Plastic Sheeting, Manufacture of made up Textile Articles. The Compound Growth Rate in the number of factories during the pre-liberalization period is estimated to be 1.87 percent. EMPLOYMENT There is unanimity amongst the scholars that the organized manufacturing sector registered jobless growth during the period from1980-81 to 1990-91. While the average annual rate of growth of gross value added during this period was about 8.66 percent the corresponding average annual employment growth was merely 0.53 percent. ISSN: 2393 9125 www.internationaljournalssrg.org Page 3
Table no. 3 EMPLOYMENT AND COMPOUND GROWTH RATE IN THE PRE- LIBERALIZATION PERIOD The table shows that there are wide fluctuations across the product group and in different years during the post-liberalization period. The aggregate employment in terms of total number persons engaged among the years, maximum number of persons engaged is 1855997 in 1996-97 and minimum number of persons engaged is 1466366 in 1992-93. Among the product group the maximum number of persons engaged is 14099202 in the product group of Manufacturing of Cotton Spinning, Processing other than in Mills (1711) and minimum number of person engaged is 189569 for the product group of Manufacturing of Fabrics or Plastic Sheeting, Manufacturing of Making of Blankets and Shawls (1722). The Compound Growth Rate in the number of persons engaged during the post-liberalization period is estimated to be 6.61 percent. GOVERNMENT INITIATIVES It is clear from the table no. 3 that there are wide fluctuations across the product group and year wise. The aggregate employment in terms of total number of persons engaged is 1739874 in 1981-82 which is the maximum and the minimum number of persons nagged is 1432428 in 1989-90. Among the product group the maximum number of persons engaged is 13317687 in the product group of the Manufacturing of Cotton Spinning and Processing other than in Mills (1711) and minimum number of person engaged is 58386 for the product group of Manufacturing of Fabrics or Plastic Sheeting, Manufacture of made up Textile Articles (1721). The Compound Growth Rate in the number of people engaged during the pre-liberalization period is estimated to be 1.47 percent. EMPLOYMENT IN THE POST- LIBERALIZATION PERIOD Table no.4 Employment and Compound Growth Rate in the Post- Liberalization Period India is the second largest producer of silk in the world and employs a large number of skilled and unskilled tribal women. During his recent visit to Jammu & Kashmir the Prime Minister declared a scheme for the development of nomads. Recognizing their contribution and efforts, the Textiles Minister felicitated 54 women engaged in sericulture. With a vision to encourage and train the youth of Jammu and Kashmir for fashion design and thereby generate employment opportunities, the Government has increased its financial support for setting up the NIFT centers in Srinagar from 50 per cent to 90 per cent. The setting up of integrated textile parks is one of the flagship schemes of the Ministry of Textiles. It aims to assist small and medium entrepreneurs in the textile industry to clusterize investments in textile parks by providing financial support for world class infrastructure in the parks. Handlooms may be promoted with a focus on developing high-end niche products by linking it with contemporary fashion. Further, e- marketing initiatives will be pursued in order to cut down intermediaries and increase wage earnings of weavers. This would make handlooms attractive to younger generations as well. FINDINGS The average annual trend growth rate in number of factories at the aggregate and product group level witnessed wide variations. It is evident that the intra-industry growth rates have fluctuated with in a small range in a protected environment indicating balanced growth in the establishment of new units. During the period of study from 1980-81 to 2009-10, it has been observed in the number of factories grew at an average rate of 2.53percent per annum with a negligible acceleration over time. ISSN: 2393 9125 www.internationaljournalssrg.org Page 4
In the case of employment growth, the postlumbarization scenario of the industry is surprisingly better with 6.61 annual average growths than the pre-reform period. The annual average growth rate was 2.04 percent during post- MFA regime; we noted here that the negative growth in employment is due to the labour saving technological advancement in the Indian textiles industry. CONCLUSION In the case of employment growth, the post -, libarization scenario of the industry is surprisingly better with 6.61 annual average growths than the pre-reform period. The annual average growth rate was 2.04 percent during post-mfa regime; we noted here that the negative growth in employment is due to the labour saving technological advancement in the Indian textiles industry. Even after the implementation of various textile policies in India, Textile sector is facing increased competition from the multinational companies and survival of the fittest has been the buzz-word against the backdrop and in the light of the present study, the following strategies are recommended promotion of the textile sector in India. There is also a need to encourage large-scale production, particularly in man-made and garment sectors, flexible labour laws, easy entry exit norms for the firms are some of the basic policy measures which would help the Indian textile and garment industry become more cost effective. Further, it would be prudent to focus on selected states having comparative advantage in a specific industry. Such measures could help convert the post MFA challenges into an opportunity rather than a threat. The study reveals that competition has improved the performance of the industry. In a competitive environment the share of labour input is higher in most of the product groups followed by capital, therefore the results emphasize the importance of skilled labour component for the industry. The problem of shortage of power is wide spread throughout the country and the textile units are hit hard by this. 3. Bhandari, Anup Kumar and Subhash C.Ray,(2007) Technical efficiency in the Indian Textiles industry; A non parametric analysis of firm level data. Indian statistical institute, Calcutta, and university of Connecticut, storrs, CT, USA, pp 1-12. 4. Chandra, Pankaj (1999), Competing through Capabilities-Strategies for Global Competitiveness of Indian Textile Industry Economic & Political weekly, Vol. XXXIV, No.9, Feb 27-March 05, pp. M17-M24. 5. Ganesh, S (2002), Indian Textile Industry: Stifled by Warped Policies, Economic and Political weekly, Vol. XXXVII, No.12, March 23-29, pp. 1095-1100. 6. Kumar, Rakesh (2001), Efficiency and Technology undercurrents in Indian Textile Industry The Indian Economic journal, Vol.49, No.2, Oct-Dec, pp. 73-81. 7. Pelzman, Joseph (1984): MFA and its Effect on the Profit Performance of the US Textile Industry online available at: http://works,bepress.com.josephpelzman/19,last accessed on 5 Feb.2010. 8. Government initiatives for textile sector growth (2014), Uniform growth of different segments aimed, The textile magazine, http://www.indiantextilemagazine.in/indus try-news/modi-government-initiatives-fortextile-sector-growth/ REFERENCE 1. Aggarwal, Pradeep (2001); Improving India s Exports of Textiles and Garments Economic & Political weekly, Vol. XXXVI, No.41, Oct 13-19, pp. 3886-88. 2. Banik, Nilanjan and Saurabh Bandopadhyay (2000) Cotton textile industry in India, In wake of MFA phase out RGCIS working paper, series No.9, pp:1-26. ISSN: 2393 9125 www.internationaljournalssrg.org Page 5