chapter iv growth of textile industry in...

53

Chapter IV

GROWTH OF TEXTILE INDUSTRY IN INDIA

4.1 Introduction

The phenomenal growth of textile industry in India has been striking features

in the economic development of the country since independence. It has contributed to

the overall growth of the country in terms of Gross Domestic Product (GDP),

employment generation and export. It has acquired a prominent place in the socio-

economic development of the country during the past four and a half decades.

Performance of the textile sector, which forms a major part of industrial sector, has

therefore got direct impact on the growth of the national economy. The present

section deals with the growth of Indian textile industry during the period from 1980-

81 to 2009-10 which represents pre liberalization (1980-81 -1991-92) and post-

liberalization (1992-93-2004-05) and post-MFA regime (2005-06-2009-10)

The evolution of textile policy in India has been along a trajectory intend to

make the industry more efficient and competitive. In the textile policy of 1985;

greater emphasis was given to modernization through up-gradation of technology by

ensuring the availability of adequate funds under soft loan scheme of IDBI (Industrial

Development Bank of India). The policy removed unnecessary controls and

regulations on the existing units and closure of unviable mills (Roychowdhury, 1995).

While the textile policy of 1985 made some efforts to make the plants more efficient,

the policies skipped off from significant structural changes like elimination of

licenses that would have made the industry more competitive. Further, there were no

changes in the restrictive labour laws and reservation of markets for small-scale firms

which were the key barriers to the capacity expansion to benefit from the economies

of scale.

Economic Reforms of 1991 in India brought some changes in the industrial

policies which sought to deregulate industries and expose firms to international

competition. It represented both a challenge, and an opportunity, to the protected

manufacturing sector.

54

The process of liberalization opened-up textile sector to potential entrants.

Besides eliminating the system of licensing, the textile sector was removed from the

list of reservation for the small scale industries. In 2000, a new textile policy was

announced by the Government with the aim of modernizing the textile industry to

meet the global competition and implemented in a time bound manner with the

technology up-gradation fund scheme covering all manufacturing sectors of the

textile industry. The policy relaxed the restrictions on foreign investment, foreign

technology and foreign equipment to make the domestic industry more efficient and

competitive.

Indian textile industry started to integrate fully with WTO from January 2005.

The system of bilateral quotas regulating global textile industry for many years in the

name of MFA was phased out before 31 December 2004. The MFA was replaced by

the ATC which incorporated a series of stages of phasing out quantitative restrictions,

occurring at the beginning of 1995, 1998, 2002 and 2005, Nagaraj (1989) studied

trends in compound annual growth rates of textile industry during 1986-87 and

concluded that unregistered units recorded a better growth rate 5.8 percent than the

registered units (3.3 percent and entire manufacturing sector recorded a growth of

4.6 percent during the period under review. Porter (1992) made a strong case for

India’s garment sector in the post-MFA regime and cautioned that in garments too,

there is no room for India to be complacent as there will be tough competition from

countries like China, which manufacture in a much larger scale using better

technology. Chandra (1999) recorded that the global textile trade regime changed

drastically from the year 2005 with phase-out of MFA. The implication of the policies

is that firm have been improving their capabilities are the ones that are going to

benefit the most. The study discussed the nature of competition that Indian textile

firms are going to face domestically and globally. Some of the characteristics of

competitive firms that will emerge in the ensuing period are indicated. Landes et al.,

(2005) examined the growth prospects of India’s cotton and textile industries. They

argued that the demand for cotton and man-made fibers of India will increase in

response to rising consumer demand in India and increasing in exports of textiles and

apparel the removal of the Multi-fiber arrangement quotas, and various studies related

to growth have been undertaken. The major studies are from Sasidaran and

Shanmugam, (2008). Kathuriya and Bhardwaj (1998), Bernard Sinclair-Desgagne

55

(2002), Pulapre Balakrishnan and M. Suresh Babu (2003), C. Veeramani (2004),

Ratan Kumar Ghosal (2006), J. Stan Metcalfe, John Foster and Ronnie Ramlogan

(2006), Fulvio Castellacci (2006), L.G.Burange (2006), Sheila Devi (2008),

Nagraj(2008).

Research work pertaining to the impact of economic reforms on growth and

exclusively textiles manufacturing industry were very few and scanty. More over the

studies have not dealt with reform periods except that of Pradeesh (2008) and Nagaraj

(2008) that too in textile industries. Issues and the number of sub-sectors considered

in the estimation of growth and its sources on Indian textile industry is very much

limited and there is hardly any study which considered post-MFA scenario Hence this

study has been undertaken to fill the gap.

The analysis is undertaken in the present study is based on the product groups

which are identified in terms of product codes. The codes and their corresponding

product names are indicated in appendix: 1 . The study examined the performance of

textile industry in terms of growth indicators and product groups.

4.2 Growth Indicators and Product Groups of the Textile Industry

The growth indicators which have been considered to analyze the growth of

the industry in India, are (i) Number of Factories (ii) Gross Fixed Capital Formation

(Gross block) (iii) Employment (number of persons engaged) and (iv) Gross Value

Added (output) in various product groups of the textile industry.

4.2.1 Number of Factories

Increases in the number of factories, against the backdrop of regulation by

government and local bodies on the establishments are bound to throw light on the

implications of reforms. This is the analytical rationale for choosing the number of

factories as a growth indicator in the reform era. In the study, the number of factories

is a taken as real variable. It has got the following limitations.

56

1. Irrespective of the value of assets, size of capital, employment and output, each

unit gets equal weightage which is a serious limitation especially in a

comparative analysis.

2. The status of premises in which the unit is located may also be a limitation.

Number of Factories in the Pre-Liberalization Period

Table 4.2 presents the number of factories in the textile product manufacturing

industry in India in the pre-liberalization period. The Compound Growth Rate

computed, using the procedure described in section 3.3 of the Chapter-III is given in

the last row of the table.

Table: 4.1

Number of Factories and Compound Growth Rate in the Pre-Liberalization Period

Table 4.1 presents product group wise and year wise number of factories and growth rate in

percentage during pre-liberalization period from 1980-81 to 1991-92.

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1980-81 3384 6164 1456 93 209 196 296 801 1219 13818

1981-82 3198 6651 1460 104 269 213 267 828 1177 14167

1982-83 3100 5584 1277 76 191 151 233 749 968 12329

1983-84 3106 5795 1441 89 236 179 233 725 1045 12849

1984-85 3111 5419 1396 85 189 161 310 961 1191 12823

1985-86 3158 5844 1434 88 209 161 225 805 1186 13110

1986-87 3016 5618 1513 86 189 180 203 793 1211 12809

1987-88 2965 5706 1600 158 214 271 220 868 1334 13336

1988-89 2844 5811 1674 111 160 235 211 833 1445 13324

1989-90 2955 5873 1845 150 173 314 201 919 1429 13859

1990-91 2967 6115 1829 153 219 336 197 1021 1611 14448

1991-92 2896 6107 1837 164 185 366 247 1058 1752 14612

Total 36700 70687 18762 1357 2443 2763 2843 10361 15568 161484

CGR (%) -1.16 -0.13 2.97 6.27 -1.92 6.91 -2.55 2.38 4.11 1.87

Source: Calculated from ASI data

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 (1711) and

minimum number of 1357 units in the product group of Manufacturing of Fabrics or

57

Plastic Sheeting, Manufacture of made up Textile Articles (1721). The Compound

Growth Rate in the number of factories during the pre-liberalization period is

estimated to be 1.87 percent. (Bracketed figures show the product code, the details are

given in appendix: 1

Number of Factories and Compound Growth Rate in Post-Liberalization Period

Table 4.2 presents the number of factories in the textile product manufacturing

industry in India during post-liberalization period. The Compound Growth Rate

computed, using the procedure described in section 3.3 of the Chapter III is given in

the last row of the table.

Table 4.2

Number of Factories and Compound Growth Rate in the Post-Liberalization Period

The product group wise and year wise number of factories and their growth rate in

percentage are presented in table 4.2


Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1992-93 3241 7529 1646 190 167 328 216 1172 2031 16520

1993-94 3367 7209 2104 219 216 369 266 1417 2846 18013

1994-95 3216 7108 2122 223 233 366 282 1669 3004 18223

1995-96 3410 8165 2168 182 235 311 250 1507 3211 19439

1996-97 3311 7808 2136 193 222 418 259 1631 3375 19353

1997-98 3562 7752 2509 177 199 393 260 1380 3004 19236

1998-99 3420 7620 2694 282 189 467 416 1722 3093 19903

1999-00 3472 7441 2931 324 353 515 385 1663 3392 20476

2000-01 3421 7131 2900 403 399 468 330 1930 3353 20335

2001-02 3155 6546 2606 426 446 446 400 1688 3273 18986

2002-03 2874 6452 2708 347 471 548 377 1861 3297 18935

2003-04 2868 6194 2882 442 471 565 410 2071 3173 19076

2004-05 2960 6228 2907 584 407 581 443 2260 3386 19756

Total 42277 93183 32313 3992 4008 5775 4294 21971 40438 248251

CGR (%) -1.09 -1.73 4.08 9.58 9.02 4.93 5.60 4.00 2.31 4.08

58

While looking at the growth rate in the number of factories over the years,

1999-2000 recorded maximum number of 20476 units and minimum number of

16520 in 1992-93. Among the product groups, maximum number of 93183 units are

recorded in the product group of Manufacturing of Cotton Spinning, Processing other

than in Mills (1711) and minimum number is in the product group in the

Manufacturing of made up Textile Articles (1721) with 3992 units. It is also seen that

there are product wise and year wise fluctuations in the number of factories. The

Compound Growth Rate in the number of factories in the post liberalization period is

recorded as 4.08 percent.

Number of Factories in the Post -MFA Regime

The number of factories in the textile product manufacturing industry in India

in the post-MFA regime is given in the table 4.3. The Compound Growth Rate

computed, using the procedure described in section 3.3 of the Chapter III is given in

the last row of the table 4.3.

Table: 4.3

Number of Factories and Compound Growth Rate in the Post -MFA Regime

Table 4.3 records the year wise and product group wise number of factories

and their compound growth rate in the post-MFA regime from 2005-06 to 2009-10.


Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

sector

2005-06 3185 7319 3153 490 365 642 376 2259 4438 22227

2006-07 3187 7386 3269 529 376 679 385 2370 4714 22895

2007-08 3190 7453 3390 571 388 717 395 2486 5008 23598

2008-09 3192 7520 3515 617 401 758 404 2609 5320 24336

2009-10 3142 7181 3246 558 387 675 400 2396 4573 22562

Total 15896 36859 16573 2765 1917 3471 1960 12120 24053 115618

CGR (%) -0.25 -0.20 1.32 4.23 1.85 2.14 1.76 2.17 1.83 1.65

59

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.

Number of Factories in the Pre- Liberalization, Post- Liberalization and Post-

MFA Regime

A concise presentation of the growth rate of the number of factories for the

nine product group in the pre-liberalization (1980-81 to 1991-92), post-liberalization

period (1992-93 to 2004-05) and post-MFA regime (2005-06 to 2009-10) has been

made below using the diagram for easy comprehension.

60

Figure: 4.1

Growth Rate in Number of Factories in Indian Textile Industry in the Pre-

Liberalization, Post-Liberalization and Post-MFA Regime

Source: Growth rate (%) from table No. 4.1, 4.2 and 4.3 A review of the growth in the number of factories in the three spells of time

reveals that the pre-liberalization period witnessed 1.87 percent growth, while the

growth rate in the post-liberalization period and post-MFA regime are 4.08 percent

and 1.65 percent respectively. A concise inquiry in to the causative factors of growth

rate is attempted in chapter VII where the important tenets of the thesis are

consolidated.

-4

-2

0

2

4

6

8

10

12

140 1711 1712 1721 1722 1723 1729 1730 1810 Textile

Sector

CG

R (

%)

Product Code

Pre(1980-81 to 1991-92) Post (1991-92 to 2004-05) Post MFA(2005-06 to 2009-10)

61

4.2.2 Gross Fixed Capital Formation/Gross Block

Uchikawa (2001) has shown that there was a sharp acceleration in gross

investment in the first half of the 1990s. The gross fixed capital stock as per Annual

Survey of Industries (ASI) increased at the rate of 10.1 per cent per annum at 1980-81

year. A regression equation estimated for the time-series of capital stock showed that

a multiplicative dummy for the post-1990 period was significant at the 5 percent

level, confirming the acceleration of investment after the economic reforms.

Mazumdar and Sarkar (2004) showed that there was substantial increase in the

fixed capital of manufacturing industries from Rs. 16.74 lakh crores in 1980-81 to Rs.

239.28 lakh crores in 1995-96 and investment rose from 15.57 percent to 54.92

percent. The index of real capital growth had also zoomed to 280 in 1995-96 from

174 in 1980-81.Rani and Unni (2004) reported that the growth rate in fixed capital of

organized sector for the period from 1989 to 95 was 13.56 per cent and it marginally

declined to 12.09 per cent during 1994-2000. Whereas in the unorganized sector it

was 5.25 percent in 1989-95 and increased to 6.39 percent in 1994-2001. In

particular, the fixed capital growth rate in organized textile industry was 14.75

percent during 1989-95 and declined to 13.29 percent during the period between

1994-2001. The scenario was entirely different in the unorganized sector with 5.62

percent during 1989-95 and 4.28 percent in 1994-2001.Nagaraj (2008) recorded that

the Indian economy turned around after 2002-03, clocking a growth rate of 8.7 per

cent per annum based on an industrial recovery and the growth has been underpinned

by an unprecedented rise in the fixed investment. The India’s fixed investment rate –

gross fixed capital formation (GFCF) as a ratio of domestic output – has gone up by 7

percentage points in five years to reach 33 percent in 2006-07 – up from around 25

percent in the second half of the 1990s. It represents the largest increase in the

investment rate India ever witnessed, taking it close to those attained by the East

Asian Economies in their phase of rapid economic growth. Also the gross fixed

capital formation has risen from 22.8 percent of GDP at current prices in 2001-02 to

35.9 percent in 2006-07.

Thus the emerging hypotheses is that Indian manufacturing sector in general

and Indian textile industry in particular showed more inclination towards capital

intensification especially in a liberalized environment and this section seeks to

explore that hypothesis.

62

In this section the average annual trend growth in gross fixed capital

formation and its acceleration/deceleration in Indian textile industry in the pre-

liberalization period, post-liberalization period and post-MFA period is discussed.

Gross Fixed Capital Formation in the Pre-Liberalization Period

The gross fixed capital formation expressed in lakhs of rupees in 9 textile

product manufacturing industry in India in pre-liberalization period is presented in

table 4.4 The Compound Growth Rate (GCR) computed using the methods briefly

described in section 3.3 of the Chapter III is given in the last row of the table

Table: 4.4

Gross Fixed Capital Formation and Compound Growth Rate in the Pre-

Liberalization Period

The product group wise and year wise growth of fixed capital formation and their

growth rate in percentage is presented in this table 4.4

(Rs.in lakhs)


Table 4.4 shows that there are wide fluctuations in gross fixed capital

formation across the product group and year wise. Among various years maximum

gross fixed capital formation was Rs 100633.86 lakhs in 1990-91 and minimum of

Rs 52491.77 lakhs in 1988-89. Among the product groups the maximum gross fixed

capital formation of Rs.716559.99 lakhs is in the product group of Manufacturing of

Cotton Spinning, Processing other than in Mills, Weaving and Finishing (1711) and

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1980-81 781.50 47684.96 2782.52 128.05 205.28 285.57 55.89 264.23 477.64 52665.65

1981-82 926.00 48324.00 2728.00 262.00 193.00 325.00 108.00 422.00 633.00 53921.00

1982-83 850.09 60185.96 3870.02 275.14 372.87 469.64 92.03 438.33 838.71 67392.79

1983-84 650.87 69143.12 3583.41 304.47 597.08 530.54 50.14 772.11 505.01 76136.74

1984-85 783.25 57275.47 3990.50 416.23 607.08 296.20 140.76 652.85 784.97 64947.32

1985-86 1067.26 58930.31 4617.50 229.34 432.74 564.02 142.63 666.13 1228.53 67878.44

1986-87 705.43 44615.50 6145.74 245.74 362.79 373.64 365.89 976.74 1269.77 55061.24

1987-88 823.74 55447.48 7182.73 246.76 272.66 667.63 2262.59 927.34 1504.32 69335.25

1988-89 1348.73 41785.44 3325.32 284.18 229.75 489.87 227.22 1034.81 3766.46 52491.77

1989-90 697.66 62052.63 4425.15 577.78 606.43 483.04 458.48 1921.05 3774.27 74996.49

1990-91 924.34 86134.39 5795.24 497.35 237.04 1229.10 622.22 1156.61 4037.57 100633.86

1991-92 1191.48 84980.72 4621.52 473.54 116.14 546.19 865.92 1664.57 5084.30 99544.39

Total 10750.35 716559.99 53067.65 3940.58 4232.87 6260.44 5391.76 10896.77 23904.54 835004.96

CGR(%) 2.34 3.15 5.38 8.57 -2.88 7.59 29.52 16.05 25.63 10.59

63

minimum of Rs 3940.58 lakhs for the product group of Manufacturing of Fabrics or


Growth Rate in the gross fixed capital formation in the pre-liberalization period is

estimated to be 10.59 percent.

Gross Fixed Capital Formation and Compound Growth Rate in the Post-

Liberalization Period

The gross fixed capital formation expressed in lakhs of rupees in the 9 textile

product manufacturing industry in India in the post-liberalization period is presented

in table 4.5. The Compound Growth Rate has been computed using the methods

briefly described in section 3.3 of the chapter III and is given in the last row of the

table 4.5.

Table: 4.5

Gross Fixed Capital Formation and Compound Growth Rate in the Post-Liberalization Period (Rs.in lakhs)


While looking at the growth rate in the gross fixed capital formation over the

years 2004-05 recorded maximum of Rs283817.25 lakhs and minimum of Rs

125127.30 lakhs in 2001-02. Among the product groups, maximum gross fixed

capital formation Rs 1945538.31 lakhs is recorded in the product group

Manufacturing Cotton Spinning and Processing other than in Mills (1711) and

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1992-93 2061.37 109398.28 7723.61 939.91 549.79 600.86 428.33 2039.91 6414.16 130156.22

1993-94 1849.18 134884.02 15418.44 1242.21 3623.77 1747.95 638.93 4394.67 12520.49 176319.67

1994-95 1230.08 189018.05 17221.80 789.10 424.44 3380.45 5910.15 4830.08 21522.18 244326.32

1995-96 2406.59 216100.37 9450.92 849.45 809.16 1529.30 1829.30 7269.96 21224.18 261469.23

1996-97 2040.43 210014.54 10596.81 808.16 842.20 2153.90 1540.78 5448.58 11916.67 245362.06

1997-98 2645.91 212064.41 13789.32 698.22 892.17 2113.88 1525.98 7113.17 16771.17 257614.23

1998-99 1521.55 161542.05 11193.29 848.06 778.09 680.57 3973.85 4420.14 12102.83 197060.42

1999-00 4543.82 144637.46 61762.90 2221.55 936.75 1216.96 4816.96 14174.20 22665.02 256975.62

2000-01 1341.00 96485.67 27426.67 1849.33 2078.67 1653.67 3725.33 14307.67 25831.67 174699.67

2001-02 1748.89 76676.83 11625.08 3063.81 2783.81 845.71 3092.06 8600.32 16690.79 125127.30

2002-03 882.08 105884.59 26306.60 3161.64 3178.30 1264.15 2611.01 11593.40 25102.20 179983.96

2003-04 1572.53 121570.37 20350.31 3385.19 3859.57 2052.78 3487.65 20050.00 23517.90 199846.30

2004-05 2009.36 167261.70 30289.18 16271.93 3088.01 1350.00 5563.16 24453.80 33530.12 283817.25

Total 25852.78 1945538.31 263154.92 36128.56 23844.72 20590.18 39143.50 128695.90 249809.38 2732758.25

CGR(%) -1.93 -2.89 8. 77 20.76 14.27 -0.62 14.78 17.35 8.48 8.78

64

minimum gross fixed capital formation among the product group is in the

Manufacturing of Making of Blankets and Shawls (1723) with Rs 20590.18 lakhs. It is

also seen that there are product wise and year wise fluctuation in the gross fixed

capital formation. The Compound Growth Rate in the gross fixed capital formation

in the post- liberalization period is recorded as 8.78 percent.

Gross Fixed Capital Formation in the Post-MFA Regime

The gross fixed capital formation expressed in rupees lakhs in 9 textile product

manufacturing industry in India during post-MFA regime is presented in table 4.6

The Compound Growth Rate has been computed using the methods briefly described

in section 3.3 of the chapter III and is given in the last row of the table.

Table 4.6

Growth Rate in Gross Fixed Capital Formation and Compound Growth Rate in

the Post- MFA Regime

(Rs. in.lakhs)

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

2005-06 2676.32 215647.4 37891.09 5174.37 3143.45 2530.91 10363.79 30906.41 70923.41 379257.12

2006-07 2792.12 226905.8 41827.56 5926.24 3485.82 2715.22 12469.03 36840.16 85400.52 418362.52

2007-08 2872.43 235460.7 45536.34 6694.14 3812.19 2872.43 14795.12 43307.80 101415.11 456766.31

2008-09 3039.16 251290.9 50984.85 7776.45 4288.12 3125.64 18055.01 52359.67 123859.92 514779.71

2009-10 2677.88 219313.3 41305.8 8368.63 3563.52 2518.84 12249.22 37573.57 83025.81 410596.60

Total 14057.93 1148618 217545.6 33939.85 18293.11 13763.07 67932.17 200987.6 464624.8 2179762

CGR (%) 0.86 1.36 3.77 13.12 4.68 1.32 7.29 7.70 7.11 5.25


Among the five years period of the post-MFA regime, the year 2008-09

marked the maximum gross fixed capital formation of Rs 514779.71 lakhs and the

year 2005-06 with the minimum gross fixed capital formation of Rs 379257.12 lakhs.

Among the product groups the maximum gross fixed capital formation of Rs

1148618.12 lakhs is recorded by the product group Manufacturing of Cotton Spinning,

Processing other than in Mills, Weaving and Finishing of Cotton Textiles on

Handlooms (1711) and the minimum of Rs 13763.07 lakhs by the product group

65

Manufacturing of all types of Threads, Cordage, Ropes, Twines and Nets etc (1723).

The CGR attained during the Post-MFA regime is 5.25 percent. The complete phasing

out of MFA is a significant policy shift as far as Indian textile industry is concerned.

Gross Fixed Capital Formation and Compound Growth in the Pre-

Liberalization, Post-Liberalization and Post-MFA Regime

The growth rate of the gross fixed capital formation for the product group in

the pre-liberalization period, post-liberalization and post-MFA regime has presented

in the Fig 4.2

Figure: 4.2

Growth Rate in Gross Fixed Capital Formation in Indian Textile Industry in the

Pre- Liberalization, Post-Liberalization and Post-MFA Regime

Source: Growth rate (%) from table No 4.4, 4.5 and 4.6

-5

0

5

10

15

20

25

30

35

140 1711 1712 1721 1722 1723 1729 1730 1810 Textile

Sector

CG

R (

%)

Product Code

Pre(1980-81 to 1991-92) Post(1992-93 to 2004-05 Post-MFA(2005-06 to 2009-10)

66

Gross Fixed Capital Formation growth rate in the pre- liberalization, post-

liberalizationand post-MFA regime is given figure 4.2 Growth rate for the period of

pre-liberalization is 10.59 percent, for the post-liberalization period it is 8.78 percent

and post-MFA regime recorded 5.25 percent.

4.2.3 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. The resultant employment elasticity was 0.06 (Kannan and Raveendran,

2009).

The employment stagnation in the 1980s was also confirmed by the studies of

World Bank (1989), Fallon and Lucas (1993), Papola (1994), Ghose (1994), Nagaraj

(1994), Kannan (1994) Bhalotra (1998), Dutta Roy (1998) and Goldar (2000).

The growth of employment in the organized manufacturing sector during the

1990’s has also been analyzed by a number of researchers and the general consensus

has been that employment growth picked up considerably during the first half of the

1990s. Goldar (2000) showed that employment in the organized manufacturing sector

registered an impressive growth of 4.03 percent during the period from 1990-91 to

1995-96 comparing favorably with the growth rate achieved in the 1970s (3.8 per

cent). Kannan and Raveendran, (2009) again argue that for the period as a whole as

well as for two separate periods – the pre and post reform phases – the picture that

emerges is one of “jobless growth”. One set of industries was characterized by

employment creating growth while another set by employment displacing growth.

Over this period there has been acceleration in capital intensity at the expense of

employment generation.

Many studies argued that the effects of economic reforms on the employment

situation in India have been pessimistic in the post-reform period also (Mundle 1992,

1993; Deshpande 1992; Bhattacharya and Mitra 1993, Agarwal and Goldar 1995;

Kundu 1997). The impression that one would gather from these studies about the

prospects of employment growth in manufacturing in the post-reform period is

67

proven to be wrong by the marked acceleration that has taken place in employment

growth in organized manufacturing in the 1990s.

This is the background against which this section examines the employment

implications of growth performance in terms of growth in employment so as to

further probe the “jobless growth” phenomenon reported for earlier but shorter

periods and to subject the examination of the growth and employment performance in

terms of product groups to find if there are any discernible patterns in Indian textile

industry.

Employment in the Pre- Liberalization Period

Table 4.7 presents the employment (total number of persons engaged) in the 9

textile product manufacturing industry in India during the pre-liberalization period.

The Compound Growth Rate (CGR) has been computed using the methods described

in section 3.3 of the chapter III is given in the last row of the table 4.7

Table: 4.7

Employment and Compound Growth Rate in the Pre- Liberalization Period


Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1980-81 - - - - - - - - - -

1981-82 175782 1382312 79614 5472 14852 9198 8301 14829 49514 1739874

1982-83 164354 1243298 86807 5239 16998 8117 7548 16994 49108 1598463

1983-84 177633 1305169 90841 5453 15161 7947 7513 17213 50020 1676950

1984-85 124212 1323029 90605 5081 16810 8657 7522 20408 52760 1649084

1985-86 116141 1317595 88845 4464 17384 10577 6810 18194 58391 1638401

1986-87 134766 1140331 103210 4734 11660 10528 7069 20408 60303 1493009

1987-88 133522 1147526 97240 4028 9396 9026 6048 19075 59141 1485002

1988-89 115480 1136836 100872 5356 9733 11033 8089 26463 70790 1484652

1989-90 117091 1088444 89945 6210 8168 10991 6675 20704 84200 1432428

1990-91 134853 1127639 103939 6638 13328 13019 7764 30307 94832 1532319

1991-92 124824 1105508 100480 5711 8459 16906 7477 33699 103375 1506439

Total 1518658 13317687 1032398 58386 141949 115999 80816 238294 732434 17236621

CGR (%) -2.93 -2.06 1.80 1.41 -6.41 6.47 -0.43 7.35 8.06 1.47

68

It is clear from the table 4.7 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 engaged 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


Growth Rate in the number of people engaged during the pre-liberalization period is


Employment in the Post- Liberalization Period

Table 4.8 provides the employment (total number of persons’ engaged) in the

9 textile product manufacturing industry in India during the post-liberalization period.

The Compound Growth Rate has been computed using the methods described in

section 3.3 of the chapter-3 is given in the last row of the table 4.8.

Table 4.8

Employment and Compound Growth Rate in the Post- Liberalization Period

Source: calculated from ASI data

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1992-93 114668 1072389 96716 6931 5906 13107 9281 31859 115509 1466366

1993-94 135943 1083866 107220 8823 5270 11849 7555 36805 133909 1531240

1994-95 139582 1062669 134639 9758 10832 13949 8703 48677 190489 1619298

1995-96 129087 1075586 115915 9685 9156 17647 10112 50919 229878 1647985

1996-97 152828 1231939 124207 8677 9334 16820 9616 51771 250805 1855997

1997-98 159248 1145709 117731 9411 8362 20588 10944 59105 253036 1784134

1998-99 166776 1129759 144027 9928 10114 23208 11258 45531 273210 1813811

1999-00 115626 1061454 147168 13911 13335 16514 18929 58226 275540 1720703

2000-01 142967 966790 170959 21979 11517 30491 18912 62577 294746 1720938

2001-02 123528 936597 176155 26086 18562 24696 18985 87566 329401 1741576

2002-03 103568 881312 138218 23600 16635 20436 21116 80806 316223 1601914

2003-04 105357 844770 155801 20622 21068 26702 19031 90525 335050 1618926

2004-05 91979 803913 163758 33257 24712 26946 20449 137349 378542 1680905

Total 1789237 14099202 1977756 244849 189569 287378 206036 1002846 3825289 23622162

CGR (%) -2.46 -2.80 4.16 13.95 11.73 6.06 9.05 10.98 8.76 6.61

69

The table 4.8 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


Employment in the post- MFA Regime

Table 4.9 presents the employment (total number of persons engaged) in the 9

textile product manufacturing industry in India during the post-MFA regime. The

Compound Growth Rate has been computed using the methods described in section

3.3 of the chapter III is given in the last row of the table 4.9.

70

Table 4.9

Employment and Compound Growth Rate in the Post- MFA Regime

Source: calculated from ASI data


marked the maximum number of persons engaged which is 2127034 and the year

2005-06 with the minimum number of person engaged as 1818369. Among the

product groups the maximum number of persons engaged is 4150037 in the product

group Manufacturing of Cotton Spinning, Processing other than in Mills, Weaving and

Finishing of Cotton Textiles (1711) and the minimum of 83382 in the product group

Manufacturing of Making of Blankets, Shawls, Carpets, Rugs and Other Similar Textiles

products (1722). The CGR attained during the Post-MFA regime is 2.04 percent. The

complete phasing out of MFA is a significant policy shift as far as Indian textile

industry is concerned.

Employment in the Pre- Liberalization, Post-Liberalization and Post-MFA

Regime

The growth rate of the employment (total number person enaged) for the

product group during the pre-liberalization period, post-liberalization and post-MFA

regime is given in figure 4.3

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

2005-06 108080 802449 185242 42181 24766 24425 21145 161130 448951 1818369

2006-07 111895 859538 177272 28609 14385 29788 20466 127293 536445 1905691

2007-08 110584 844264 183067 31165 14563 31431 21557 139331 594877 1970839

2008-09 109288 829261 189051 33948 14743 33163 22706 152508 659673 2044341

2009-10 108007 814525 195230 36980 14925 34992 23917 166931 731527 2127034

Total 547854 4150037 929862 172883 83382 153799 109791 747193 2971473 9866274

CGR (%) -0.25 -0.06 1.71 -0.92 -9.41 8.61 3.56 2.55 12.56 2.04

71

Figure: 4.3

Growth Rate in Employment in Indian Textile industry in the Pre-

Liberalization, Post-Liberalization and Post-MFA regime


The analysis of growth rate in employment for the pre- liberalization (1980-81

to 1991-92), post-liberalization (1991-92 to 2004-05) and post-MFA regime (2005-06

to 2009-10) shows that they are 1.47 percent and 6.67 percent and 20.04 percent

respectively.

-15

-10

-5

0

5

10

15

20

140 1711 1712 1721 1722 1723 1729 1730 1810 Textile

Sector

CG

R (

%)

Product code

Pre (1980-81 to 1991-92) Post (1992-93 to 2004-05) Post-MFA 2005-06 to 2009-10

72

4.2.4 Gross Value Added (Output)

Uchikawa (1999) observed that the growth rate of gross value added (GVA) is

a good indicator of market conditions. As rapid growth of GVA in an industry

generates an expectation that the industry will grow in the future, investment in the

industry will increase. Gross value added and gross fixed capital formation of textile

products including wearing apparel industry had grown throughout the 1980s and

their growth rates of GVA and GFCF accelerated in the 1990s. Goldar (2000) studied

the growth rate of gross value added (at constant prices) for different two-digit

industries have reported that the growth rate of GVA in Indian manufacturing sector

was 8.67 percent in 1980s and marginally declined to 7.43 percent in the 1990s. The

rate of growth in Indian textile products was 10.44 per cent during 1990-97 as

compared to 14.63 per cent during 1980s.

Balakrishnan and Babu (2003) found that the annual average rate of growth in

the nineties had risen almost across the board at two digit level of industry.

Nevertheless, they argued that the acceleration is not particularly impressive for what

is often hailed as the most significant policy regime shift since 1950. Rani and Unni

(2004) have shown that value added in the organized manufacturing sector registered

an impressive growth rate of 8.25 per cent during 1989-95 as compared to 1984-90 at

7.20 per cent and 1994-2000 at 6.94 per cent. Whereas in the unorganized sector it

was negative 0.99 per cent in 1989-95 and increased to 6.92 per cent in 1994-2001.

The growth rate in organized textile industry was 6.41 per cent during 1989-95 and

declined to 2.86 per cent in 1994-2000. In the unorganized textile industry growth in

value added was (-2.88) per cent in 1989-95 and it grew by 6.26 percent in 1994-

2001.The analysis indicates that economic reform policies have differential impact on

various industry groups.

Nagaraj’s (2003) findings show that while the total manufacturing gross value

added grew at over 8 per cent per annum in real terms during 1981-87, the registered

manufacturing segment recorded a growth over 10 per cent per annum with reference

to National Account Statistics (NAS) data 1989.

Further, it is observed that, since 1980-81 output in the manufacturing sector

has grown at 7 per cent per year. Nagaraj (2003) It is further records that, industrial

73

output growth during the last two decades has improved compared to the previous

period of relative stagnation. But contrary to both the euphoria and apprehension with

the acceleration of reforms there has been little change in the trend growth rate of

output in the 1990s compared to the previous decade. Moreover, since the mid 1990s,

there are distinct signs of a slowdown in growth for seven years now and “stalled”

reforms since the mid-1990s are widely believed to be responsible for the industrial

deceleration. Balakrishnan (2005) does not provide any support for his argument

about acceleration in the rate of growth during the post-reform period. Kaur (2007)

argued that there is no denying the fact that reforms ushered in a new era of growth

and development. The liberalized policies adopted since 1991-92 not only accelerated

the overall growth rates but also develop the confidence of foreign investors in the

Indian industry. Kannan and Raveendran (2009) pointed out that, in terms of output

growth, all the manufacturing industries seem to have done quite well, and many of

them registered double digit growth rates during the post-reform period. Unlike in the

case of employment, no polarization is discernible. The growth rate of GVA in Indian

textile industry was 4.33 per cent for the period from 1981-82 to 1991-92 and

increased to 5.34 per cent in the period beween1992-93 to 2004-05.

As opposed to the common view that acceleration in average growth is

credited to policy reforms initiated in 1991, Delong (2004) argued that acceleration

began in the early or mid 1980s could not be due to policy in initiatives, though it is

further admitted that the rapid growth in the second half of the 1980’s could not be

sustained without the second wave of reforms of the 1990’s. Rodrik (2004) joins

Delong in stating that the reforms undertakes in the 1990’s cannot be accepted as a

turning point in the Indian manufacturing.

As the debate continues for and against the positive impact of reforms on the

growth of acceleration of Indian manufacturing industries, the present study re-

examine the issues with reference to Indian textile industry.

Gross Value Added in the Pre- Liberalization

Table 4.10 presents the gross value added (output) in the textile product

manufacturing industry in India during the pre-liberalization period. The Compound

74

Growth Rate (CGR) has been computed using the methods described in section 3.3 of

the chapter-3 is given in the last row of the table 4.10.

Table: 4.10

Gross Value Added and Compound Growth Rate in the Pre- Liberalization Period

(Rs. in.Lakhs)


It is clear from the table 4.10 that there are wide fluctuations of gross fixed

capital formation across the product group and year wise. Among the various years

maximum gross value added was Rs 384145.3 lakhs in 1990-91 and minimum of Rs

229532.7 lakhs in 1981-82. Among the product group the maximum gross value

added is Rs.2773155.66 lakhs in the product group of Manufacturing of Cotton

Spinning, Processing other than in Mills, Weaving and Finishing (1711) and the

minimum of Rs 17068.2 lakhs for the product group of Manufacturing of Embroidery

Work, Zari Work and Making ornamental Trimmings (1729). The Compound Growth

Rate in the gross value in the pre-liberalization period is estimated to be 8.09 percent.

Year

NIC 140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1980-81 4176.41 207716.73 9644.15 1140.12 1720.77 1830.65 1046.37 2120.97 5116.94 234513.1

1981-82 4081.89 197547.12 12004.65 1194.76 2457.38 1928.34 1136.92 3331,09 5854.65 229532.7

1982-83 5337.6 197128.94 11999.02 1100.39 2894.69 2261.81 1175.2 3387.8 6684.06 231969.5

1983-84 9292.68 232136.96 14090.06 1078.8 2254.22 2652.91 1143.53 4891.18 6541.28 274081.6

1984-85 5596.55 213857.03 13821.69 2130.65 2453.57 5950.7 1078.88 3703.37 8805.26 257397.7

1985-86 6819.8 205498.07 16335.65 999.23 1942.77 2757.93 1015.47 4304.72 8563.81 248237.4

1986-87 6515.2 232116.13 18134.06 1223.69 1957.91 2886.2 1195.64 3844.12 11226.81 279099.8

1987-88 7408.08 205475.63 20047.35 1490.25 1605.15 3299.44 1377.44 4626.04 14944.99 260274.4

1988-89 8585.9 212694.78 14797.36 1666.46 1683.45 2908.75 1425.42 6307.11 19681.56 269750.8

1989-90 7564.54 291561.57 20753.72 2164.78 2748.36 3333.14 2096.97 9759.07 24529.45 364511.6

1990-91 7829.47 306020 19852.11 1967.37 3564.21 4857.89 1515.26 9718.42 28820.53 384145.3

1991-92 8793.55 271402.82 21640.99 2749.75 2743.71 3710.47 2862.03 10375.63 39849.95 364128.9

Total 82000.78 2773155.66 193120.2 18905.49 28025.81 38377.89 17068.21 66369.43 180618.6 3397642

CGR (%) 6.08 3.26 6.76 7.32 1.90 6.32 7.13 13.54 20.52 8.09

75

Gross Value Added in the Post- Liberalization Period

The gross value added (output) in the 9 textile product manufacturing industry in

India in the post-liberalization period is presented in table 4.11. The Compound

Growth Rate has been computed using the methods described in section 3.3 of the

chapter III is given in the last row of the table.

Table 4.11

Gross Value Added and Compound Growth Rate in the Post- Liberalization Period

(Rs.in Lakhs)


The table 4.11 presents gross value added (output) during the post-

liberalization period and wide fluctuations gross value added across the product group

and in different years have been observed. Among the various years maximum gross

value added is Rs 797437.5 lakhs in 2004-05 and minimum of Rs 404066.3 lakhs in

1992-93 have also been observed. Among the product group the maximum gross

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810

Textile

Sector

1992-93 9095.82 302981.8 22602.46 3665.85 3290.42 4380.84 1911.55 12170.52 43967.08 404066.3

1993-94 14431.99 342617.6 41470.92 3226.69 3337.9 4369.12 3026.09 16152.69 86908.04 515541.1

1994-95 5954.69 369969.2 36268.94 5380.94 3359.19 4128.67 3133.74 15637.91 87957.96 531791.2

1995-96 13685.75 307906.4 24164.59 3515.56 2618.86 4892.35 3039.2 20500.31 75375.23 455698.2

1996-97 15873.26 354937.8 24597.16 4334.34 3603.8 5420.64 4441.76 24876.89 67572.72 505658.4

1997-98 20199.89 360131.1 25371.58 3588.1 2240.77 5773.33 3152.52 17817.87 68511.7 506786.9

1998-99 15017.21 325058 38586.18 4296.42 5999.72 3714.4 7568.69 17742.71 88281.71 506265.1

1999-00 13721.13 416264.7 84689.63 11998.74 11149.25 9542.53 8673.71 40781.05 134942.5 731763.3

2000-01 12996.47 448101.2 64569.97 13218.71 9728.53 6996.04 19406.77 48998.32 129375.4 753391.4

2001-02 13463.36 400589.8 50142.69 14565.11 13812.56 6973.33 10823.53 36025.38 117251.2 663646.9

2002-03 10291.91 435620.2 56024.15 11888.34 12712.99 8088.9 12217.01 44966.75 137085.8 728896.0

2003-04 12911.47 393654.5 70878.51 17564.68 13113.62 9184.54 15260.34 52645.61 122362.2 707575.4

2004-05 23872.41 408977.8 81579.1 25487.44 13735.93 7870.9 15362.62 62402.69 158148.6 797437.5

Total 181515.4 4866810.0 620945.9 122730.9 98703.54 81335.59 108017.5 410718.7 1317740 7808518

CGR(%) 3.77 2.53 10.06 18.56 17.48 6.81 20.41 13.98 8.27 11.32

76

value added is Rs. 4866810.0 lakhs in the product group of Manufacturing of Cotton

Spinning and Processing other than in Mills (1711) and minimum of Rs 98703.54

lakhs for the product group of Making of Blankets, Shawls, Carpets, Rugs and Other

Similar Textiles Products (1722). The Compound Growth Rate in the gross value added

for the pre-liberalization period is estimated to be 11.32 percent.

Gross Value Added in the Post- MFA regime

Table 4.12 presents the gross value added (output) in the textile product

manufacturing industry in India during the post-MFA regime. The Compound

Growth Rate has been computed using the methods described in section 3.3 of the

chapter III and is given in the last row of the table. This is given in the last row of

table 4.12.

Table: 4.12

Gross Value Added and Compound Growth Rate in Post- MFA Regime

(Rs.in Lakhs)

Year

NIC 0140 1711 1712 1721 1722 1723 1729 1730 1810 Total

2005-06 36180.71 549385.5 95228.61 15665.35 21567.56 18424.51 17782.62 96840.11 300746.9 1322822

2006-07 32664.94 698934.5 118500.7 59078.74 30573.88 19651.33 20670.45 115114.4 429852.2 1547041

2007-08 42491.94 778787.4 138152 45490.62 30538.33 18528.13 31318.53 141662.1 565081 1759050

2008-09 44436.53 811375.6 150596.1 48501.45 42443.22 26515.14 35726.87 163003.7 663700.8 1938299

2009-10 79129.31 869492.2 118811.3 51044.72 57971.78 33198 35972.22 115804.6 441505.9 1802930

Total 234903.4 370797.5 621288.7 219780.9 183094.8 116317.1 141470.7 632424.9 240088.7 8370142

CGR (%) 7.45 9.74 12.26 22.91 18.32 10.82 21.44 14.9 22.35 15.58



marked the maximum gross value added that is Rs 1938299 lakhs and 2005-06 with

the minimum gross fixed capital formation of Rs 379257.12 lakhs. Among the

product group the maximum gross value added of Rs 632424.9 lakhs is recorded by

the product group Manufacturing of Knitted or Crocheted Textile Products (1730) and

the minimum of Rs116317.1lakhs by the product group of Manufacturing of all types

77

of Threads, Cordage, Ropes, Twines and Nets etc (1723). The CGR attained during

the Post-MFA regime is 15.58 percent. The complete phasing out of MFA is a

significant policy shift as far as Indian textile industry is concerned.

Gross Value Added (Output) in the Pre- Liberalization, Post-Liberalization and

Post-MFA Regime

The growth rate of the gross value added (output) for the 9 product group

during the pre-liberalization period (1980-81 to 1991-92), post-liberalization (1991-

92 to 2004-05) and post-MFA regime (2005-06 to 2009-10) periods has been

presented in the figure 4.4.

Figure: 4.4

Growth Rate of Output in Indian textile industry in the pre- liberalization, Post-

liberalization and post-MFA regime


0.00

5.00

10.00

15.00

20.00

25.00

140 1711 1712 1721 1722 1723 1729 1730 1810 Textile

Sector

CG

R (

%)

Product Code

Pre (1980-81 to 1991-92) Post(1992-93 to 2004-05 Post-MFA(2005-06 to 2009-10)

78

In the pre-liberalization period gross value added increased at an annual

average rate of 8.09 percent, this has been 11.32 percent in the post-liberalization

period. The post-MFA regime recorded a high rate of 15.58 percent.

4.3 The Growth Rate of Textile Industry in India in the Pre-Liberalization,

Post- Liberalization and Post-MFA Regime

A study of the performance of an industry in different periods of time during

which some policy changes appeared would enable to bring out of the implications of

such policy changes. It is in this context that study of the overall growth performance

of textile industry in terms of growth in (i) Number of Factories (ii) Gross fixed

capital formation (iii) Employment and (iv) Output, in the pre-liberalization (1980-81

to 1991-92), post- liberalization (1991-92 to 2004-05) and post-MFA regime (2005-

06 to 2009-10) have been undertaken. This is condensed in table no 4.13

4.3.1 Pre-liberalization Period

Among the different indicators, Gross fixed capital formation has registered

the highest growth rate of 10.59 percent followed by output with 8.09 percent growth

and Number of units with 1.87 percent. Comparatively a poor performance has been

recorded in employment which is 1.47 percent. This is contents in table no 4.14.

4.3.2 Post-Liberalization Period

Among the different indicators examined in the post-liberalization period,

Output registered the highest growth rate of 11.32 percent followed by Gross Fixed

Capital Formation with 8.78 percent and Employment with 6.61 percent. The

minimum of 4.08 percent was registered in the case of number of factories.

4.3.3 Post-MFA Regime

In the post MFA regime, the Industry’s growth rate among the different

indicators shows that output continued to register highest growth percentage of 15.58,

followed by Gross Fixed Capital Formation with 5.25 percent. The minimum of 1.65

percent is registered in Number of factories and employment recorded 2.04 percent

growth.

79

4.3.4 A Comparative Analysis of the Overall Growth Rate of Textile industry

in India in the Pre-Liberalization, Post- Liberalization and Post-MFA

Regime

The growth rate of textile industry in India in the pre-liberalization, post-

liberalization and post-MFA regime is given in fig 4.5

Figure: 4.5

The Growth Rate of Textile Industry in the Pre- liberalization, Post-

liberalization and Post-MFA Regime

Source: Growth rate (%) from Table No (4.13)

-4.00

-2.00

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

140 1711 1712 1721 1722 1723 1729 1730 1810 Total

CG

R (

%)

Product code

Pre(1980-81 to 1991-92) Post(1992-93 to 2004-05) Post-MFA(2005-06 to 2009-10)

80

4.4 Conclusions:

• 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 2.53 percent per annum with a

negligible acceleration over time.

• The rate of growth of gross fixed capital formation was 7.87 per cent during the

entire period of analysis. The pre and post-liberalization periods have relatively

higher growth in capital formation than the post-MFA regime. The single most

reason could be the total phasing out of Multi-Fiber Agreement (MFA) and

ushering in an era of competition. To face the competition, the entrepreneurs

might have embarked upon cost cutting strategies through advanced technology

and automated machines warranting heavy investments in capital assets

especially in plant and machinery.

• In the case of employment growth, the post-liberization scenario of the industry

is surprisingly better with 6.61 annual average growth 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.

• The average growth of output in textile industry during pre-liberalization period

was 8.09 percent.

• The industry’s output growth rate marginally improved to 11.32 percent during

post-reform period. In other words the growth momentum achieved in the pre-

liberalization period accelerated to the post-MFA regime also. It is to be noted

that the inter product group variations in growth rates were not significant and

uniform throughout the post reform period.

• The performance of textile industry during the post-MFA regime recorded a significant

annual growth rate of 15.58 percent.

81

Table: 4.13, A Comparative Growth Rate in the Pre-Liberalization, Post- Liberalization and Post-MFA Regime

(in percentage)

Pre-Liberalization period

Post-Liberalization period

Post- MFA regime

Cod

e N

0

Nu

mb

er o

f U

nit

s

Gro

ss B

lock

Em

plo

ym

ent

Ou

tpu

t

Nu

mb

er o

f U

nit

s

Gro

ss B

lock

Em

plo

ym

ent

Ou

tpu

t

Nu

mb

er o

f U

nit

s

Gro

ss B

lock

Em

plo

ym

ent

Ou

tpu

t

140 -1.16 2.34 -2.93 6.08 -1.09 -1.93 -2.46 3.77 -0.25 0.86 -0.25 7.45

1711 -0.13 3.15 -2.06 3.26 -1.73 -2.89 -2.8 2.53 -0.2 1.36 -0.06 9.74

1712 2.97 5.38 1.8 6.76 4.08 8.77 4.16 10.06 1.32 3.77 1.71 12.26

1730 2.38 16.05 7.35 13.54 4.01 17.35 10.98 13.98 2.17 7.7 2.55 14.9

1723 6.91 7.59 6.47 6.32 4.93 -0.62 6.06 6.81 2.14 1.32 8.61 10.82

1729 -2.55 29.52 -0.43 7.13 5.61 14.78 9.05 20.41 1.76 7.29 3.56 21.44

1722 -1.92 -2.88 -6.41 1.9 9.02 14.27 11.73 17.48 1.85 4.68 -9.41 18.32

1810 4.11 25.63 8.06 20.52 2.31 8.48 8.76 8.27 1.83 7.11 12.56 22.35

1721 6.27 8.57 1.41 7.32 9.58 20.76 13.95 18.56 4.23 13.12 -0.92 22.91

Average 1.87 10.59 1.47 8.09 4.08 8.78 6.61 11.32 1.65 5.25 2.04 15.58

chapter iv growth of textile industry in...

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