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