Chanakya IAS Academy Blog


The article analyses our textile sector and suggests further measures to be taken to improve its health in the wake of China’s exit.

  • 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.
  • China, which gained highly in textiles and apparel sector by getting access to the markets of developed countries in the post-Uruguay Round is beginning to exit due to rising domestic wages.
  • This will create a huge supply gap and the government has announced a special package of Rs. 6000 cr to make use of the opportunity.
  • The Agreement of Textiles and Clothing under the World Trade Organisation vouches for equal treatment to be meted out to all nations.
  • But Vietnam and Bangladesh are already securing better terms for themselves via free trade agreements with major markets. That underlines the urgency of the reforms the sector needs in India.
  • When the Multi Fibre Agreement imposed by developed countries on the developing world was phased out, it was expected that India would benefit from it too.
  • But the textile industry hasn’t been able to scale up accordingly due to following reasons:
    • Rigidities in the labour market.
    • Import restrictions on competing man-made fibres.
    • Export quotas on cotton and logistics costs.
  • To counter these problems and the problem of negative protectionism which hampers the smooth provisioning of imported inputs required for the industry the government has announced this package.
  • 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.
  • 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.
  • 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 employment.
  • Female labour force participation rate is also expected to increase from a boost to the textile industry
  • Further suggestions to improve competitiveness:
    • The issues of productivity suffered by an industry largely restricted to the small scale and unorganized sectors needs to be addressed.
    • Emphasis should be laid on promotion and marketing of textiles and designs that are indigenous to India.
    • Fabindia’s success in branding and marketing Indian designs and textiles in the global apparel market, for instance, is worth studying here.
    • Geographical indications could prove to be an effective means of securing a niche market for Indian handloom in foreign markets. India’s muga silk used for Japanese kimonos is a case in point.
    • Given rising Internet penetration in the country, e-commerce could also be used to the advantage of the textile industry—to eliminate layers of middlemen and improve access. The example of the Taobao model in China where an entire village specializes in the production of a commodity and sells it at competitive prices online is relevant.

Question: Promoting traditional industries does not mean creating a protective shield against the emerging competition through tariffs. If an industry has to successfully progress and provide network effects, it must be allowed to grow to its full potential. Discuss the statement with reference to our textile sector and suggest measures to improve its health.

Suggested Approach:

  1. Reasons for bad health of textile sector, mainly protectionist policies.
  2. Need to open up the sector and support innovations.
  3. Suggest further measures.


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