The Em­ploy­ment Gen­er­a­tion Po­ten­tial of Tex­tile & Ap­parel In­dus­try Un­matched; Yet ...!

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One of the big­gest chal­lenges for any na­tion is to en­sure that there are am­ple em­ploy­ment op­por­tu­ni­ties for its peo­ple and that the un­em­ploy­ment rate is kept at a min­i­mal. In fact, the level of em­ploy­ment is among the crit­i­cal barom­e­ters for any coun­try’s eco­nomic health, and ev­ery pro­gres­sive Gov­ern­ment aims to sup­port in­dus­tries that can pro­vide huge em­ploy­ment op­por­tu­ni­ties to its pop­u­lace. In this con­text, the tex­tile and ap­parel in­dus­try is a fron­trun­ner for em­ploy­ment gen­er­a­tion, and in In­dia it has been ac­knowl­edged as the sec­ond largest job cre­ator, af­ter agri­cul­ture, which is the largest com­mer­cial ac­tiv­ity in this coun­try of farm­ers. Yet, the tex­tile and ap­parel sec­tor has not emerged as a core in­dus­try for in­vest­ment.

It is es­ti­mated that over 50 mil­lion peo­ple are di­rectly em­ployed in the tex­tile value chain, with a ma­jor­ity com­ing from the ap­parel man­u­fac­tur­ing seg­ment as it is heav­ily re­liant on man­power. An­other 20 mil­lion peo­ple find jobs in in­dus­tries that are re­lated to the in­dus­try. In 2017, ap­prox­i­mately 13 mil­lion peo­ple were di­rectly em­ployed in ap­parel man­u­fac­tur­ing alone. A large num­ber of these work­ers are women, who not only find pride in sup­port­ing their fam­ily in­come, but also earn re­spect in so­ci­ety for their con­tri­bu­tion.

The crit­i­cal im­por­tance of the tex­tile and gar­ment in­dus­try as a growth driver for the econ­omy and more specif­i­cally for em­ploy­ment gen­er­a­tion can be eas­ily gauged from some very stark com­par­isons be­tween the in­dus­try and other so-called core in­dus­tries. RIL, In­dia’s big­gest busi­ness house with re­ported as­sets worth US $ 110 bil­lion, em­ploys 2,50,000 peo­ple across its var­i­ous ven­tures, which means that it em­ploys five work­ers for each US $ 2.2 mil­lion in as­sets. On the other hand, Shahi Ex­ports, which is In­dia’s largest ap­parel ex­porter, has as­sets worth US $ 185 mil­lion and em­ploys 1,06,000 work­ers in its ap­parel fac­to­ries, mean­ing that it em­ploys 1,260 work­ers for ev­ery US $ 2.2 mil­lion in as­sets. The bot­tom line is that for the same in­vest­ment, Shahi Ex­ports cre­ates

252 times the jobs that RIL does. Sim­i­larly, Ori­ent Craft, with a turnover of Rs. 1,600 crore, em­ploys 32,000 peo­ple, while Maruti Suzuki In­dia, with a turnover of Rs. 48,000 crore, em­ploys just 19,000. Even though the sta­tis­tics speak for them­selves, it is still a mat­ter of heated de­bate as to why this in­dus­try has not been given its due in the growth strat­egy of the coun­try, de­spite its em­ploy­ment gen­er­a­tion po­ten­tial. No one can doubt that em­ploy­ment cre­ation is one of the most im­por­tant agen­das for the In­dian Gov­ern­ment. In ret­ro­spect, it is found that since al­most the be­gin­ning, Gov­ern­ment in­vest­ment pol­icy con­fined large firms and big in­dus­tri­al­ists to in­vest ex­clu­sively in a set of listed ‘core’ in­dus­tries, which were all highly cap­i­tal-in­ten­sive. As a re­sult, over time, big in­dus­trial groups have be­come hard­wired into be­liev­ing that sec­tors such as ap­parel are not for them, though many of them have roots in the tex­tile in­dus­try, in­clud­ing the Reliance Group.

As of to­day, the tex­tile sec­tor in

In­dia ac­counts for 10 per cent of the coun­try’s man­u­fac­tur­ing pro­duc­tion, 5 per cent of In­dia’s GDP, and 13 per cent of In­dia’s ex­ports earn­ings – ob­vi­ously an en­cour­ag­ingly start­ing point for in­vest­ment, but it is not hap­pen­ing. Even the Make in In­dia blue-print ac­knowl­edges that the tex­tile sec­tor of­fers tremen­dous em­ploy­ment op­por­tu­ni­ties for peo­ple, es­pe­cially in the ru­ral re­gions. Fac­to­ries can take some­one with ba­sic ed­u­ca­tion and im­part nec­es­sary train­ing in just six weeks to make them em­ploy­able; no other in­dus­try can claim such fast turn­around. Also, on an av­er­age, these work­ers earn Rs. 15,000 a month, which is bet­ter than what semi-trained work­ers in un­or­gan­ised in­dus­tries would be earn­ing.

Job cre­ation at the core of tex­tile and gar­ment in­dus­try…

In 2016, the Cen­tral Gov­ern­ment recog­nis­ing the mas­sive job cre­ation po­ten­tial of the gar­ment sec­tor an­nounced a Rs. 6,000 crore pack­age for this labour-in­ten­sive sec­tor, which in­cluded free­dom to mills to have fixed-term em­ploy­ees. A cru­cial com­po­nent of the pack­age was that the Gov­ern­ment will bear the en­tire 12 per cent em­ployer’s con­tri­bu­tion to the em­ploy­ees’ prov­i­dent fund for the first three years (against

8.33 per cent ear­lier un­der a scheme). Through the pack­age, the Gov­ern­ment had tar­geted to cre­ate one crore ad­di­tional jobs, in­vest­ments of Rs. 74,000 crore and ex­tra ex­ports of US $ 30 bil­lion

(over and above the tex­tile and gar­ment ex­ports of US $ 40 bil­lion in 2015-16) over a three-year-pe­riod. The im­me­di­ate re­ac­tion of the in­dus­try was pos­i­tive and many ex­porters came for­ward to pledge com­mit­ments, but even af­ter two years only 655 units have ac­tu­ally availed the ben­e­fit so far and the num­ber of ben­e­fi­cia­ries in terms of jobs stood at 1,55,564, ac­cord­ing to Labour Min­istry, and not all are new em­ploy­ment.

Ac­cord­ing to the Cen­sus con­ducted in 2011, by the year 2025, In­dia will have over 832 mil­lion peo­ple in the work­ing age group of 18-59, up from 658 mil­lion to­day. That is a lot of peo­ple to ab­sorb for gain­ful em­ploy­ment in less than a decade. Which other in­dus­try has even come

close to the tex­tile and ap­parel in­dus­try in en­vis­ag­ing such huge job cre­ations…? The im­pe­tus has to come from the pol­icy mak­ers that the in­dus­try is the fu­ture of the coun­try; if we want in­clu­sive growth and while big ticket in­dus­tries will drive In­dia to global power, the tex­tile in­dus­try will keep the mo­men­tum mov­ing with em­ploy­ment gen­er­a­tion and happy pop­u­la­tion.

Prime Min­is­ter Modi is very much aware that the tex­tile in­dus­try holds the key for em­ploy­ment gen­er­a­tion. Modi is backed by his ex­pe­ri­ence with the tex­tile sec­tor in Gu­jarat and hard num­bers that were achieved. He had re­alised the sec­tor’s po­ten­tial when he was the Chief Min­is­ter of Gu­jarat, one of In­dia’s largest tex­tile cen­tres (tex­tiles con­trib­ute more than 23 per cent to the state’s gross do­mes­tic prod­uct). Many be­lieve Modi is tak­ing the lessons from Gu­jarat for­ward. The buzz in the Tex­tile Min­istry is that Modi un­der­stands the tex­tile in­dus­try well and will be sup­port­ing all those State Gov­ern­ments that come up with a pol­icy which cre­ates in­vest­ment op­por­tu­nity for the tex­tile & ap­parel in­dus­try and makes an in­clu­sive im­pact by cre­at­ing jobs, in­creas­ing pro­duc­tion and push­ing up de­mand and ex­ports.

No won­der that over the last two years, the coun­try has seen a string of new in­vest­ment poli­cies from many State Gov­ern­ments, tar­geted at the tex­tile & ap­parel in­dus­try. Odisha, Te­lan­gana, Andhra Pradesh, Mad­hya Pradesh, Jhark­hand and most re­cently, Ut­tar Pradesh have made ef­forts to en­tice in­vest­ment in the in­dus­try. The state wit­nessed the sign­ing of at least 29 MoUs worth Rs. 7,436 crore in tex­tile seg­ment. No doubt, em­ploy­ment gen­er­a­tion is the un­der­lin­ing thrust in each case. The states have even promised cer­tain level of flex­i­bil­ity in labour laws that have been the big­gest pain points for huge in­vest­ments and shar­ing of wages in the ini­tial years of set­ting up the fac­to­ries. Other ben­e­fits in­clude sub­si­dies on land, en­ergy, taxes, etc.

Prom­ise of skilled labour…, still un­ful­filled

Also promised by all are train­ing fa­cil­i­ties un­der the var­i­ous skill de­vel­op­ment pro­grammes for ready avail­abil­ity of trained labour. While the In­te­grated Skill De­vel­op­ment Scheme ex­isted prior to the cur­rent Gov­ern­ment, Modi launched the

Skill In­dia cam­paign in 2015 with the aim to train over 400 mil­lion peo­ple in In­dia in var­i­ous skills by 2022. The cam­paign en­cap­su­lated var­i­ous ini­tia­tives like Na­tional

Skill De­vel­op­ment Mis­sion; Na­tional Pol­icy for Skill De­vel­op­ment and En­trepreneur­ship, 2015; Prad­han Mantri Kaushal Vikas Yo­jana (PMKVY) and the Skill Loan Scheme. Though on pa­per, the var­i­ous schemes show note­wor­thy re­sults, the in­dus­try has not re­ally seen an in­flux of trained man­power. Real­is­ing that there has to be a syn­ergy be­tween train­ing of what the in­dus­try wants and the em­ploy­ment op­por­tu­ni­ties avail­able, the Gov­ern­ment in De­cem­ber 2017 ap­proved a new skill de­vel­op­ment ar­range­ment called Scheme for Ca­pac­ity Build­ing in Tex­tile Sec­tor (SCBTS), specif­i­cally for the tex­tile sec­tor. The scheme cov­ers the en­tire value chain of the tex­tile sec­tor ex­clud­ing spin­ning and weav­ing. A bud­get al­lo­ca­tion of Rs. 1,300 crore has been made for the pro­gramme that in­tends to ad­dress the ab­sence of skilled man­power in the labour­in­ten­sive tex­tile in­dus­try of In­dia. The scheme, ap­pli­ca­ble till

2019-20, would be im­ple­mented through tex­tile units, re­puted train­ing in­sti­tu­tions (rel­e­vant to the tex­tile sec­tor), and in­sti­tu­tions of Tex­tile Min­istry and State Gov­ern­ments. Around 10 lakh peo­ple are likely to gain ben­e­fits of the skilling pro­gramme. The SCBTS will of­fer de­mand-driven and place­ment ori­ented skilling plat­forms to cre­ate jobs in the tex­tile sec­tor. About

1 lakh peo­ple will be trained in tra­di­tional sec­tors.

Great po­ten­tial…, but ex­ports stag­nat­ing

In the last decade, the ex­port of tex­tile and ap­parel has al­most stag­nated. In 2012, the com­bined ex­port of tex­tiles and ap­parel was US $ 38 bil­lion which in­creased by about 18 per cent an­nu­ally to be to­day at US $ 45 bil­lion, over a pe­riod of 6 years, with ap­parel ac­count­ing for only US $ 18 bil­lion. Whereas the ex­port from coun­tries like Bangladesh (ap­parel) reached

US $ 28.6 bil­lion from US $ 19.2 bil­lion and Viet­nam (ap­parel) grew from US $ 14 bil­lion to US $ 31 bil­lion in 2017, more than dou­ble its ex­port. Sta­tis­tics how­ever clearly in­di­cate the ad­van­tage In­dia has in the global tex­tile arena. The coun­try is the sec­ond largest pro­ducer of cot­ton in the world; it is ex­pected to pro­duce around 37.7 mil­lion bales in the year 2017-18, an in­crease by around 9.5 per cent over last year. It con­trib­utes 12 per cent of the world’s pro­duc­tion of cot­ton fi­bres & yarn and is the largest ex­porter of cot­ton yarn with a share of 25 per cent in world cot­ton yarn ex­port mar­ket.

Fur­ther, the In­dian tex­tile in­dus­try is sec­ond largest af­ter China, in terms of spindleage, and has a share of 23 per cent of the world’s spin­dle ca­pac­ity with around 6 per cent of global ro­tor ca­pac­ity. The coun­try also has the high­est loom ca­pac­ity, in­clud­ing hand­looms, with a share of 61 per cent in world loomage. In com­par­i­son, Viet­nam and Bangladesh have very lit­tle to of­fer to their ap­parel ex­port com­mu­nity with the tex­tile (fab­ric) in­dus­try al­most non-ex­is­tent in both these coun­tries. The RMG ex­port in both these coun­tries de­pends 80 per cent on fab­ric im­ports. When com­par­ing the in­fra­struc­ture and the avail­abil­ity of the in­put ma­te­rial, In­dia is way ahead of both these coun­tries. In ad­di­tion, In­dia also has the largest pool of un­em­ployed youth, though its econ­omy is grow­ing at

7 per cent in the cur­rent fis­cal.

More than 30 per cent of the to­tal youth (age group be­tween 15 to 29 years) is ei­ther un­em­ployed or in ed­u­ca­tion or train­ing ac­cord­ing to OECD re­port, which comes to around 100 mil­lion youth with no ed­u­ca­tion avail­able for em­ploy­ment and who can be made in­dus­try-ready with 35 days of train­ing. In com­par­i­son to Bangladesh and Viet­nam, whose en­tire pop­u­la­tion stands at 170 mil­lion and 96.49 mil­lion, re­spec­tively, this lim­its In­dia’s growth po­ten­tial.

The port fa­cil­i­ties are an­other area where In­dia is far su­pe­rior in com­par­i­son to many of its so-called newly de­vel­oped com­pe­ti­tion. Its 12 ma­jor ports have con­tainer­ized cargo ca­pac­ity of 8.75 mil­lion TEUs whereas Bangladesh and Viet­nam have ca­pac­ity of 2.4 mil­lion TEUs and 11.5 mil­lion TEUs re­spec­tively. While In­dia han­dled more than a bil­lion tonnes of cargo in 2016-17, Bangladesh has the ca­pac­ity to han­dle around 54 mil­lion tonnes. Like­wise, no par­al­lel can be drawn on all other fronts like the avail­able in­dus­trial hubs or ed­u­ca­tion and train­ing in­sti­tutes. In­dia is far ahead.

Still, is In­dia los­ing out to its neigh­bours?

The ap­parel in­dus­try in In­dia is one of the largest for­eign rev­enue con­trib­u­tors and holds 12 per cent of the coun­try’s to­tal ex­port. In­dian ex­ports of lo­cally made re­tail and life­style prod­ucts grew at a com­pound an­nual growth rate (CAGR) of 10 per cent from 2013 to 2016, mainly led by bed­ding bath and home dé­cor prod­ucts and tex­tile. Iron­i­cally, de­spite its growth po­ten­tial, the in­dus­trial in­vest­ment in the tex­tile and ap­parel sec­tor has been dwin­dling over the years. In re­al­ity, no new in­vest­ment is com­ing into the sec­tor and this is ba­si­cally be­cause of two rea­sons.

For one, it is dif­fi­cult to get loans for set­ting up a unit as tex­tile and ap­parel is a non-pri­or­ity sec­tor for the Gov­ern­ment and the banks are mostly Gov­ern­ment-owned; and the sec­ond rea­son is the high­in­ter­est rates, which are a ma­jor de­ter­rent in tak­ing a loan. Though there is a bud­getary pro­vi­sion of sub­sidised funds avail­able un­der the TUF scheme, it is not avail­able or dis­bursed be­cause of lack of its pro­vi­sion­ing.

Why no for­eign in­vest­ment…

If we look closely at any of our de­vel­op­ing com­pe­ti­tion, it would be seen that China and Korea are play­ing or have played a ma­jor role in the es­tab­lish­ment and growth of the tex­tile and ap­parel in­dus­try in those coun­tries. Just like the United King­dom played its part in de­vel­op­ing Sri Lanka, Bangladesh was de­vel­oped by Korea and now Viet­nam, Myan­mar and Ethiopia are be­ing nur­tured by China.

Why not In­dia…? It is all be­cause of its in­ward-look­ing poli­cies of pro­tect­ing the lo­cal in­dus­try from com­pe­ti­tion with the false no­tion that they will re­main im­mune to the com­pe­ti­tion and in the process also cater to the pol­icy of ap­pease­ment of labour force.

The coun­try needs a com­mon tex­tile pol­icy for ex­ports com­pris­ing the en­tire tex­tile chain to act as a safe­guard for ex­ports from an un­ex­pected price rise in the in­put ma­te­rial that dis­rupt the ex­port pric­ing.

A sep­a­rate tex­tile pol­icy to gov­ern the hand­loom in­dus­try is also rec­om­mended be­cause that has noth­ing to do with RMG ex­ports. Since hand­loom does not sell in­ter­na­tion­ally, a sep­a­rate hand­loom and hand­i­craft min­istry must be carved out by the Tex­tile Min­istry since the agenda for both are very dif­fer­ent.

There are around 180 de­part­ments in the Min­istry which han­dle hand­loom and hand­i­craft alone.

If one can ra­tio­nalise them, a lot of work can be done and a lot of ex­che­quer money can be saved. There is also no trade mem­ber­ship in im­por­tant mar­kets, which re­stricts abil­ity to tap other po­ten­tial mar­kets.

More in­vest­ments need to be made to im­prove pro­duc­tiv­ity along the sup­ply chain and man-made sec­tion should be strength­ened to re­duce de­pen­dency on cot­ton. Fur­ther, in­fras­truc­tural bot­tle­necks and ef­fi­ciency such as trans­ac­tion time at ports and trans­porta­tion time, need to be ad­dressed. The sec­tor needs to be­come or­gan­ised and be recog­nised as an in­dus­try.

And last but not the least, the Gov­ern­ment has to relook at the un­favourable labour laws. Since the Gov­ern­ment seems to be hand­i­caped in do­ing any­thing re­gard­ing the labour laws and wages, a very sim­ple mech­a­nism can be de­vised to help ex­porters re­duce the tax rates by link­ing the cap­i­tal in­vested against peo­ple em­ployed as an ad­van­tage or sup­port to labour-in­ten­sive in­dus­try. The aware­ness on how im­por­tant the tex­tile in­dus­try is for the in­clu­sive growth of the coun­try is grow­ing. The re­sults of this aware­ness will come in only when not only the big boys of tex­tile and ap­parel make in­vest­ments, but even the mid­dle and smaller com­pa­nies feel the urge for mak­ing in­vest­ment.

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