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 socioeconomic 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 198081 to 2009-10 which represents pre liberalization (1980-81 -1991-92) and postliberalization (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.

53

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
Indias 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 Indias 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

54

(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.

55

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
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

CGR (%)

-1.16

-0.13

2.97

6.27

-1.92

6.91

-2.55

2.38

4.11

NIC

161484
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
56

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
Textile
Year
NIC

0140

1711

1712

1721

1722

1723

1729

1730

1810

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

Source: Calculated from ASI data

57

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

2005-06

0140
3185

1711
7319

1712
3153

1721
490

1722
365

1723
642

1729
376

1730
2259

1810
4438

Textile
sector
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

NIC

Source: Calculated from ASI data

58

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 PostMFA 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.

59

Figure: 4.1
Growth Rate in Number of Factories in Indian Textile Industry in the PreLiberalization, Post-Liberalization and Post-MFA Regime
12

10

CGR (%)

0
140

1711

1712

1721

1722

1723

1729

1730

1810 Textile
Sector

-2

-4

Pre(1980-81 to 1991-92)

Product Code

Post (1991-92 to 2004-05)

Post MFA(2005-06 to 2009-10)

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.

60

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 Indias 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.
61

In this section the average annual trend growth in gross fixed capital
formation and its acceleration/deceleration in Indian textile industry in the preliberalization 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 PreLiberalization 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)
Year
NIC

0140

1711

1712

1721

1722

1723

1729

1730

781.50

47684.96

2782.52

128.05

205.28

285.57

55.89

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

10750.35

716559.99

53067.65

3940.58

4232.87

6260.44

5391.76

10896.77

23904.54

835004.96

2.34

3.15

5.38

8.57

-2.88

7.59

29.52

16.05

25.63

10.59

CGR(%)

477.64

Textile
Sector

1980-81

Total

264.23

1810

Source: Calculated from ASI data

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
62

52665.65

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

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

Year
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

NIC

Source: Calculated from ASI data

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

63

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

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

3.77

13.12

4.68

1.32

7.29

7.70

7.11

2009-10

1.36

Source: Calculated from ASI data

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
64

5.25

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 PreLiberalization, 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
35

30

25

CGR (%)

20

15

10

0
140

1711

1712

1721

-5

1722

1723

1729

1730

1810 Textile
Sector

Product Code
Pre(1980-81 to 1991-92)

Post(1992-93 to 2004-05

Source: Growth rate (%) from table No 4.4, 4.5 and 4.6
65

Post-MFA(2005-06 to 2009-10)

Gross Fixed Capital Formation growth rate in the pre- liberalization, postliberalizationand 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
1990s 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
66

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
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

NIC

Source: Calculated from ASI data

67

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
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 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
Year
NIC

0140

1711

1992-93

114668

1993-94

135943

1994-95

Textile
Sector

1712

1721

1722

1723

1729

1730

1810

1072389

96716

6931

5906

13107

9281

31859

115509

1466366

1083866

107220

8823

5270

11849

7555

36805

133909

1531240

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
Total
CGR (%)

91979

803913

163758

33257

24712

26946

20449

137349

378542

1680905

1789237

14099202

1977756

244849

189569

287378

206036

1002846

3825289

23622162

-2.46

-2.80

4.16

13.95

11.73

6.06

9.05

10.98

8.76

6.61

Source: calculated from ASI data

68

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
estimated to be 6.61 percent.
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.

69

Table 4.9
Employment and Compound Growth Rate in the Post- MFA Regime

Year

Textile
NIC

0140

1711

1712

1721

1722

1723

1729

1730

1810

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

Source: calculated from ASI data

Among the five years period of the post-MFA regime, the year 2009-10
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

70

Figure: 4.3
Growth Rate in Employment in Indian Textile industry in the PreLiberalization, Post-Liberalization and Post-MFA regime

20

15

CGR (%)

10

0
140

1711

1712

1721

1722

1723

1729

1730

1810

Textile
Sector

-5

-10

-15

Product code
Pre (1980-81 to 1991-92)

Post (1992-93 to 2004-05)

Post-MFA 2005-06 to 2009-10

Source: Growth rate (%) from table No 4.7, 4.8 and 4.9

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.

71

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 19942001.The analysis indicates that economic reform policies have differential impact on
various industry groups.
Nagarajs (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
72

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 1980s could not be
sustained without the second wave of reforms of the 1990s. Rodrik (2004) joins
Delong in stating that the reforms undertakes in the 1990s 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 reexamine 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

73

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)
Year

Textile

NIC

140

1711

1712

1721

1722

1723

1729

1730

1810

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

Source: Calculated from ASI data

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.

74

Sector

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)
Year

Textile
NIC

0140

1711

1712

1721

1722

1723

1729

1730

1810

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

3.77

2.53

10.06

18.56

17.48

6.81

20.41

13.98

8.27

11.32

CGR(%)

Source: Calculated from ASI data

The table 4.11 presents gross value added (output) during the postliberalization 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
75

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

7.45

9.74

12.26

22.91

18.32

10.82

21.44

14.9

22.35

15.58

CGR (%)

Source: Calculated from ASI data

Among the five years period of the post-MFA regime, the year 2008-09
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
76

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 (199192 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, Postliberalization and post-MFA regime

25.00

CGR (%)

20.00

15.00

10.00

5.00

0.00
140

1711

1712

1721

1722

1723

1729

1730

1810 Textile
Sector

Product Code
Pre (1980-81 to 1991-92)

Post(1992-93 to 2004-05

Source: Growth rate (%) from table No 4.10, 4.11 and 4.12

77

Post-MFA(2005-06 to 2009-10)

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 (200506 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 Industrys 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.
78

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, Postliberalization and Post-MFA Regime
18.00
16.00
14.00
12.00

CGR (%)

10.00
8.00
6.00
4.00
2.00
0.00
140

1711

1712

1721

1722

1723

1729

1730

1810

Total

-2.00
-4.00

Pre(1980-81 to 1991-92)

Product code

Post(1992-93 to 2004-05)

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

79

Post-MFA(2005-06 to 2009-10)

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 industrys output growth rate marginally improved to 11.32 percent during
post-reform period. In other words the growth momentum achieved in the preliberalization 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.

80

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

-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
Average

6.27
1.87

8.57
10.59

1.41
1.47

7.32
8.09

9.58
4.08

20.76
8.78

13.95
6.61

18.56
11.32

4.23
1.65

13.12
5.25

-0.92
2.04

22.91
15.58

81

Output

Gross Block

Employment

-1.09

Number of Units

6.08

Output

-2.93

Employment

2.34

Gross Block

-1.16

Number of Units

Output

140

Code N0

Employment

Post- MFA regime

Gross Block

Post-Liberalization period

Number of Units

Pre-Liberalization period