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TFP in the
Estimation of total factor Indian garment
productivity in the Indian industry
garment industry
145
R.N. Joshi
SGGS Institute of Engineering & Technology, Nanded, India, and Received April 2009
S.P. Singh Revised September 2009
Accepted October 2009
Indian Institute of Technology, Roorkee, India

Abstract
Purpose – The Indian garment industry has witnessed a significant change since the inception of the
New Textile Policy 2000 that suggests removing the industry from the list of small-scale industries
with a view to improving its competitiveness in the global market. As productivity is the driving
factor in enhancing the competitiveness of any decision-making entity (firm), a study of total factor
productivity (TFP) and its sources can provide vital inputs to a firm for improving its competitiveness.
Keeping this as a backdrop, the paper attempts to measure the TFP in the Indian
garment-manufacturing firms; identify sources of the TFP; and suggest measures for the firms to
enhance their productivity.
Design/methodology/approach – The study is based on the firm-level panel data collected from
the Centre for Monitoring Indian Economy for the years 2002-2007. One output variable, namely, gross
sale and four input variables, namely, net fixed assets, wages & salaries, raw material, and energy &
fuel, have been selected. The DEA-based Malmquist Productivity Index (MPI) approach has been
applied to measure the TFP.
Findings – The Indian garment industry has achieved a moderate average TFP growth rate of 1.7
per cent per annum during the study period. The small-scale firms are found to be more productive
than the medium- and large-scale firms. The decomposition of TFP growth into technical efficiency
change (catch-up effect) and technological change (frontier shift) reveals that the productivity growth
is contributed largely by technical efficiency change rather than by technological change.
Originality/value – Earlier studies on the Indian garment industry have applied the partial factor
productivity approach, which has several limitations. This paper measures the TFP and identifies its
sources through applying a non-parametric DEA-based MPI approach. Through this approach, the
productivity growth is decomposed into technical efficiency change and technological change. Further,
an attempt has also been made to study the variation in the productivity growth rates across location,
scale-size and type of garments.
Keywords Garment industry, Productivity rate, India
Paper type Research paper

1. Introduction
Indian garment industry plays a significant role not only in the country’s economy but
also in the lives of millions of citizens of this country. It provides direct employment to
about 5 million workers. Currently, consumption of readymade garments in the Journal of Fashion Marketing and
domestic markets is around 70 per cent, whereas 30 per cent of garments produced are Management
Vol. 14 No. 1, 2010
exported to major markets, such as, US, Canada and Europe. With the modest start of pp. 145-160
Rs. 13920 million in 1987-1988, export of Indian readymade garments rose to Rs. q Emerald Group Publishing Limited
1361-2026
293,760 million in 2006-2007 with a statistically significant annual compound growth DOI 10.1108/13612021011025474
JFMM rate of 17.0 per cent (Joshi and Singh, 2008a). The consumption of garments in the
14,1 domestic market has increased from 1,050 million pieces in 1990-1991 to 4,415 million
pieces in 2006-2007. It is anticipated that the domestic market will grow at a rate of 9.1
per cent per annum and the export market will grow with 17 per cent per annum
during 2007-2012. For this, the number of machinery requirement would be 2.4 million
and the investment requirement would be Rs. 218,000 million (Singh, 2006).
146 Until recently, the industry was reserved for the small-scale units to protect the
employment in rural and urban areas. These policy restrictions affected investment in
the plant and machinery. In turn, this prevented the industry from updating
technology and from achieving economies of scale, thus adversely affected both quality
and productivity (Pantahki, 2001). To review the Textile Policy 1985, an expert
committee was constituted on 24 July 1998 by the Government of India. This
committee found that there was a need of creating awareness about the WTO and their
implications for the garment and textile industry (Sathyam, 1999). To improve the
competition in the garment industry, the committee made valuable suggestions like
removal of the industry from small-scale industry reservation, technology
up-gradation and automation at each stage of garmenting, design of scientific tools
to improve the productivity of the clothing and, setting of textile and apparel parks.
Keeping in view the recommendations of the committee, the Government of India
de-reserved the garment industry from the small-scale industry list in 2001. In addition
to this, on January 1, 2005, Multi Fibre Agreement restrictions on readymade garments
were fully removed and hence the trade in garments was no longer being subjected to
quotas. In this scenario, the small and medium scale garment firms are now facing
tough competition with large domestic and global firms.
Earlier studies on the industry have reported that India’s garment firms are not
globally competitive in productivity. Uchikawa (1999) finds that low productivity of
Indian firms has curtailed the advantages of low wages. Using partial factor
productivity approach (PFP), Bheda (2002) finds that productivity level achieved by
Indian firms is substantially lower than the productivity in the western countries. The
PFP approach has also been applied by several other studies on the garment industry
in India (Khanna, 1993; Bheda et al. 2003; Rangrajan, 2005; Joshi et al. 2005). Although
this technique is simple, the most important drawback is as inappropriateness of
making decisions based on one single ratio when there are many inputs and outputs
(Duzakın and Duzakın, 2007). The PFP approach also cannot capture the effects of
factors that affect the performance of the organisation (Smith, 1990). The TFP
approach has also been applied to measure the productivity in Indian textile and
garment industry. Hashim (2005) measured the TFP in the garment industry using
Translog Multilateral Index and reported the negative productivity growth in the
industry. Bhandari and Ray (2007) measured the levels of technical efficiency in the
Indian textiles industry at the firm level using data envelopment analysis (DEA). The
data used for the study relate to the production of cotton, woollen, silk, synthetic and
other natural fibres. Bhandari and Maiti (2007) used Stochastic Frontier Analysis to
estimate the technical efficiency of Indian textile firms. Joshi and Singh (2008b)
examined the TFP growth and efficiency trends in Indian textile industry, including
garment as one of the sector, using MPI. The study used Annual Survey of Industries
aggregate data and observed negative TFP growth during 1998-2004 in the garment
industry.
 Although there is no dearth of studies on manufacturing industry, however, TFP in the
studies using DEA based MPI, are, in fact, scant. MPI approach overcomes the Indian garment
problem of PFP approach by taking into account the levels of all the inputs used in
the production of output and measures the TFP growth at firm level at time and over industry
a period of time. This paper, therefore, applies the MPI approach to estimate the TFP
growth of the Indian garment firms. The step-wise process of estimation of TFP is
shown in Figure 1. 147
2. Methodology
2.1 Data selection
The Indian garment industry began in an unorganised way in the sense that scattered
small players entered the business to avail the benefit of the small-scale industry
policies. This character was further enhanced by the reservation of garments for
exclusive production in the small sector. As a result, the industry is highly
disintegrated and consists of mostly small-scale firms (Bhavani, 2002). As a
consequence, estimation of number of garment firms operated in the industry becomes
quite difficult (Uday and Sekhar, 2005). There has so far not been any credible survey
of the industry that makes an estimate of the size of the industry (Panthaki, 2002).
Earlier studies on the industry have also suffered due to unavailability of relevant data.

Figure 1.
Step-wise process of
estimation of TFP
JFMM The garment manufacturers’ perceptions of confidentiality regarding the information
14,1 further aggravate the problem of researchers in regard of having access to the required
data (Bheda et al., 2003; Kalhan, 2008). In India, PROWESS and Capitaline databases
include data on a large number of manufacturing firms, including readymade
garments. These sources have balance-sheet based financial data of the individual
companies and do not have information about the physical data such as number of
148 employees and number of machines of garment firms. In India, only annual survey of
industry (ASI) provides the data on number of employees at aggregate level and
provides firm level data without disclosing identity of the firm. ASI also does not
provide the firm level panel data of the manufacturing firms. The firm level panel data
is only available with PROWESS and Capitaline databases.
Keeping all these limitations in view, we have obtained the data from PROWESS
database of Centre for Monitoring Indian Economy, Mumbai. In this database, the
time series data of 187 garment firms during 1999-2007 are available. Out of this,
we have selected only 34 firms due to non-availability of data for some firms in
some years. Therefore, we use the panel data of only 34 firms for the period
2002-2007. The firms are classified as small, medium and large-scale firms as per
the definition of Ministry of Micro, small and medium enterprises. Earlier DEA
studies have also used the PROWESS data to estimate the productivity and
efficiency of Indian industries (Majumdar, 1999; Mohan and Ray, 2003; Kumar and
Basu, 2008; Saranga, 2009).

2.2 Variable selection

In order to account for all inputs in the productivity calculations, net fixed assets,
wages and salaries, raw material consumption, and power and fuel consumption are
considered as input variables and the gross sale is taken as an output variable. In TFP
estimation of manufacturing industry using DEA, two outputs viz. gross output (Ma
et al., 2002; Zheng et al., 2003; Yang, 2006) and net value added (Wadud and Paul, 2006;
Sahoo, 2008) are most commonly used by the researchers. In this study, we have used
gross sale as an output variable since net value added is used only when inputs are
labour and capital.
The industry could maintain international competitiveness due to low wages. Low
wage rate is an important factor of comparative advantage in the industry because the
weight of wages in gross sale is quite high (Vadhani, 2002). In addition, the industry
has easy access to more varieties of fabrics since Indian textile industry produces
cotton, blend, and manufactured fibres using handloom, powerloom, and mill sector of
various qualities at different costs. Thousands of varieties of cloth are available to suit
changes in consumer preferences and fashions. The industry has a capacity to absorb
35-40 per cent of fabrics produced by the textile industry (Pantahki, 2001). In the
garment industry, the investment in net fixed assets, raw material, wages and salaries,
and power and fuel consumption contributes 75 per cent of total inputs. Hence,
selection of these variables would be proper selection for the industry. Similar output
and input variables have also been used by the earlier studies (Majumdar, 1999; Mohan
and Ray, 2003; Saranga, 2009) on Indian manufacturing industry for performance
evaluation using DEA.
As the physical data on output and inputs are not available unit-wise, we have
taken these financial data as the next best alternative. In order to convert the monetary
value at constant price, separate series of index numbers are used by the researchers TFP in the
(Mohan and Ray, 2003; Kumar and Basu, 2008; Mukherjee, 2008) to capture the price Indian garment
movements in India, these are Consumer Price Index for Industrial Workers (CPI-IW)
and Wholesale Price Index (WPI) number. In this study, the gross sale and raw industry
material consumption are deflated with the WPI of textile at base 1993-1994 ¼ 100.
The total wages and salaries have been deflated with respect to CPI-IW at base
1981-1982 ¼ 100. Net fixed asset and power and fuel consumption are deflated using 149
the WPI of industrial machinery for textile, and WPI of fuel, power, light and
lubricants at base 1993-1994 ¼ 100 respectively.
Table I gives the summary of descriptive statistics for all input and output variables
for the years 2002 to 2007. As can be noted from the standard deviations of net fixed
assets and gross sale, there is a large variation in the sizes of the firms.

2.3 Model selection

The conventional approach to productivity measurement of Indian garment firm is
partial factor productivity. It is an indicator of the ratio of total output to a single input
such as number of garments produced per worker or number of garments produced per
machine. Thus, it ignores the contribution of other inputs. In garment production,
essential inputs required are man, machine, material and energy. PFP cannot consider

Year Statistics SALE NFA RME P&F W&S

2002 Mean 305.41 50.59 139.49 3.19 5.85

SD 387.75 63.47 168.93 5.34 7.36
Min 14.5 6.7 4.5 0.12 0.36
Max 1571.17 324.7 716.67 30.52 27.7
2003 Mean 332.39 54.36 156.54 3.44 6.87
SD 439.56 65.49 210.06 5.95 9.21
Min 14.34 6.99 3.98 0.12 0.36
Max 1746.38 303.11 944.04 34.04 37.17
2004 Mean 341.77 56.92 150.45 3.35 8.1
SD 415.36 63.98 176.41 4.95 10.45
Min 22.18 6.7 7.78 0.26 0.35
Max 1668.95 274.95 686.04 28.04 45.45
2005 Mean 469.35 60.26 226.47 3.76 9.97
SD 487.06 58.33 240.48 5.67 11.96
Min 26.91 8.44 13.42 0.3 0.45
Max 1796.61 235.55 768.7 32.45 48.64
2006 Mean 592.49 83.46 307.91 4.67 12.56
SD 609.52 96.2 331.55 7.21 15.28
Min 29.18 5.27 11.7 0.25 0.46
Max 2053.65 411.47 1104.86 41.4 54.01
2007 Mean 784.66 110.68 414.81 6.41 16.57
SD 843.75 134.17 493.94 9 23.55
Min 29.95 3.78 11.57 0.25 0.45
Max 3043.87 596.76 2182.6 46.42 110.05
Count 34 34 34 34 34 Table I.
Descriptive statistics of
Notes: SALE – Gross annual sale; NFA – Net fixed assets; RME – Raw material consumption expenses; selected Indian garment
P&F – Power and fuel expenses; W&S – Annual wages and salaries. All figures in Rupees (Million) firms
JFMM these input bundles. Therefore, the concept of TFP is more appropriate in context of
resource use efficiency. The TFP is an index of output divided by an index of input
14,1 bundle, and refers to the change in the productivity over time. The different
approaches of TFP measurement are growth accounting approach, stochastic frontier
analysis (SFA) and DEA based Malmquist productivity index.
Over the last two decades, researchers have used the growth accounting
150 approach to estimate TFP growth. This approach requires the specification of a
production function. It is based on unrealistic assumptions of perfect competition
and constant returns to scale. It assumes that a firm operates on its production
frontier, implying that it has 100 per cent technical efficiency. Thus, TFP growth
measured through this approach is due to technical change, not due to technical
efficiency change (Mawson et al., 2003). In recent years, Stochastic Frontier Analysis
and MPI have become popular approaches for estimation of TFP. The DEA
methodology has important advantages in comparison with the SFA such as; it does
not require any functional form for the production function. Second, it does not
make priori distinction between the relative importance of outputs and inputs. The
MPI has widely accepted as a good tool for measurement of TFP growth of
decision-making units. Researchers have extensively applied this technique for the
measurement of TFP growth in the manufacturing industry namely, China’s iron
and steel industry (Ma et al., 2002), Chinese State Enterprises (Zheng et al., 2003),
Australian private sector industries (Wadud and Paul, 2006), Indian food industry
(Kumar and Basu, 2008), and Indian auto component industry (Saranga, 2009).
Therefore, we have used this technique to estimate the TFP growth and its
components in the Indian garment industry.
The characteristics of garment industry are employment generation, foreign
exchange earnings and, massive export and domestic market. Now-a-days, majority of
population in urban and rural areas go for readymade garments and the domestic
market is large as thousands of units are serving it (Bhavani, 2002). Keeping in view
the growing domestic and export markets for the Indian garment industry, the firms
have to maximise the garment production using existing inputs, so output-oriented
model is more appropriate to measure the TFP in the Indian context. In the output
oriented model, the output quantities are maximised without altering the input
quantities used (Coelli et al. 2003). Here, we use the output-oriented MPI between period
s and period t (Fare et al., 1994). The MPI is given by:
" #1=2
ds0 ð yt ; xt Þ d t0 ð yt ; xt Þ
m0 ð ys ; xs ; yt ; xt Þ ¼ s x
d0 ð ys ; xs Þ dt0 ð ys ; xs Þ

where the notation ds0 ð yt ; xt Þ represents the distance from the period t observation to
the period s technology, y represents output and x represents input. It can also be
decomposed as:
" #1=2
dt0 ð yt ; xt Þ d s0 ð yt ; xt Þ ds0 ð ys ; xs Þ
m0 ð ys ; xs ; yt ; xt Þ ¼ t x
d 0 ð ys ; xs Þ d t0 ð yt ; xt Þ dt0 ð ys ; xs Þ
where the ratio outside bracket measures the technical efficiency change (EFFCH)
and ratio inside bracket measures the technological change (TECHCH). The above
equation is based on constant return to scale. Here the TFP change (TFPCH) can be TFP in the
written as:
Indian garment
TFPCH ¼ TECHCH £ EFFCH industry
The above indices can be interpreted as progress, no change and regress when their
values are greater than one, equal to one and less than one, respectively. In the
analysis, the productivity and TFP have been used synonymously. The TFP growth 151
rate can be estimated as:
TFPgrowthðpercentÞ ¼ ðTFPCH 2 1Þ £ 100

3. Empirical findings
3.1 Average TFP growth in the industry
A value of the TFP change greater than one shows the progress in the productivity
while a value of the index less than one indicates regress in the productivity. We
observe that the average TFP change during 2003-2007 is 1.017, which is greater than
one. This shows that, on an average, the garment firms have recorded a TFP growth of
1.7 per cent per annum [ð1:017 2 1:00Þ £ 100 ¼ 1:7]. The trends in TFP growth and
its components have shown in the Figure 2. It is observed that the productivity has
declined in the year 2003, 2004 and 2006. The firms achieved highest TFP growth of
15.7 per cent in the year 2005. To study the year-wise performance of firms, we have
reported the percentage of firms showing progress, regress and no change in
productivity growth and its components in Table II. It is observed that 65 per cent
firms show progress and remaining 35 per cent firms show regress in productivity in
the year 2005. Looking at the mean TFP index, 52.4 per cent, 46.4 per cent and 1.2 per
cent number of firms display regress, progress and no change, respectively, in the TFP
during the study period.
The TFP change is decomposed into technical efficiency change and technological
change to identify the sources of productivity growth. The productivity growth may
occur either due to improvement in the technical efficiency (catch up effect) or due to
improvement in technology (frontier shift) or due to both. Average values of technical
efficiency change and technological change show that the TFP growth in the garment

Figure 2.
Trends in average TFP
change, efficiency change
and technological change
in the Indian garment
industry
JFMM firms is only due to improvement in technical efficiency. Table II shows that more
14,1 number of firms exhibit progress in efficiency change throughout the study period,
except during 2004, whereas in technological change, 60.4 per cent firms exhibit
regress and only 39 per cent firms’ show progress. It is also revealed from Figure 2 that
the technical efficiency change shows progress trend. This implies that the
productivity growth in most of the firms have been due to improvement in technical
152 efficiency (catch up effect) rather than technological improvement (frontier shift).
There is regress in technological change in the firms during most of the period,
except 2004 and 2005. Though, the rate of technological progress is reasonably good
during the period 2004 and 2005, but on an average, 60.4 per cent firms show
technological regress during the study period. The result seems to be in agreement
with earlier studies (Joshi et al., 2005; Rangrajan, 2005), where they have reported that
productivity of Indian garment firms declined due to poor technology, less investment
per machine, less number of machine per firm and poor infrastructure. In addition to
this, India’s garment industry was reserved for small-scale sector until 2000. The
Indian government recognized that the major constraint affecting the growth of the
industry was restriction on the investments by large domestic and foreign companies.
Consequently, the Government of India de-reserved the industry from SSI list in
January 1, 2001 to encourage the establishment of large-scale manufacturing
operations (Government of India, 2001). The National Textile Policy 2000 took several
initiatives, including de-reservation, to give impetus to the industry. The Technology
Up-gradation Fund Scheme (TUFS) was started from April 1, 1999 with the objective to
make funds available to the domestic industry at lower interest rate to upgrade the
technology of existing units, and also to set up new units with state-of-the-art
technology. Further, the Government has extended it up to the Eleventh Five Year Plan
(Government of India, 2008). Uday and Sekhar (2005) observed that the benefits of the
scheme were mostly availed by the textile firms, not by the garment firms due to lack
of awareness among them. In addition to low productivity and poor technology,
inadequate infrastructure has also severely affected their performance. One of the ways
the government has tried to improve the infrastructure is to create apparel parks for
boosting clothing export.

3.2 Firm-wise TFP growth

Looking at the firm-wise analysis in Table III, it is observed that GF2, GF3, GF7, GF9,
GF12, GF13, GF14, GF15, GF18, GF19, GF20, GF21, GF25, GF26, GF28, GF30, GF33
and GF34 show the progress in the productivity growth during 2003-2007. Among

TFP change Efficiency change Technological change

Year PRO REG NOCH PRO REG NOCH PRO REG NOCH

2003 32 65 3 62 26 12 0 100 0
2004 35 65 0 24 62 14 71 29 0
Table II. 2005 65 35 0 47 44 9 74 26 0
Percentage distribution of 2006 44 53 3 62 32 6 24 76 0
Indian garment firms by 2007 56 44 0 62 26 12 26 71 3
TFP growth and its Mean 46.4 52.4 1.2 51.2 38 10.8 39 60.4 0.6
components during
2003-2007 Notes: PRO – Progress; REG – Regress; NOCH – No change
 TFP in the
Garment firm TFP change Efficiency change Technological change
Indian garment
GF1 0.959 1.030 0.952 industry
GF 2 1.075 0.969 1.120
GF 3 1.046 0.960 1.109
GF 4 0.961 0.993 0.967
GF 5 0.986 0.953 1.057 153
GF 6 0.996 0.997 1.000
GF 7 1.367 1.033 1.219
GF 8 0.911 0.953 0.994
GF 9 1.037 0.946 1.095
GF 10 0.935 0.969 0.991
GF 11 0.994 1.036 1.008
GF 12 1.029 1.009 1.022
GF 13 1.162 1.075 1.074
GF 14 1.043 0.970 1.080
GF 15 1.007 0.988 1.024
GF 16 0.935 1.008 0.946
GF 17 0.878 0.904 0.980
GF 18 1.044 0.967 1.084
GF 19 1.003 1.006 1.003
GF 20 1.053 0.970 1.093
GF 21 1.070 1.006 1.053
GF 22 0.982 0.952 1.016
GF 23 0.953 0.954 1.000
GF 24 0.930 0.930 1.000
GF 25 1.041 0.996 1.074
GF 26 1.052 0.971 1.103
GF 27 0.969 0.976 1.000
GF 28 1.008 0.978 1.039
GF 29 0.948 0.944 1.033
GF 30 1.022 0.988 1.045 Table III.
GF 31 0.987 0.993 1.002 Mean TFP change,
GF 32 0.984 0.946 1.040 technical efficiency
GF 33 1.203 0.984 1.233 change and technological
GF 34 1.002 0.989 1.017 change of Indian garment
Mean 1.017 0.981 1.043 firms during 2003-2007

these firms, GF7 turns out to be the most productive, since its TFP change is 1.367. Out
of 34, 16 firms show the decline in productivity as their values of TFP change are less
than one. GF17 turns out to be the worst performer among all the firms as value of its
TFP change is only 0.878.
Studying the technical efficiency change of individual firm, we observe that 28 firms
achieve progress while the remaining six firms experience reduction in the indices.
Among 34 firms, GF33 is the most efficient firm since its efficiency has increased by
23.3 per cent annually; on the other hand GF16 turns out to be the most inefficient firm
as its average efficiency change is lowest in the whole dataset. Theoretically,
improvement in the technical efficiency change of a firm indicates that the firm is
catching up to the production frontier that represents the technology of that period.
The other source of TFP growth is the technological change. Firm-wise
technological change (averages of all the years) has shown in Table III. Looking at
JFMM the indices of individual firms, we find that GF1, GF7, GF11, GF12, GF13, GF16, GF19
14,1 and GF21 achieve progress in the technological change during 2003-2007. Among these
firms, GF13 shows the highest technological progress. Remaining 26 firms show the
regress in technological change. It clearly indicates that the regress in technological
change has adversely affected the productivity growth of the firms.

154 3.3 Comparison of TFP growth by location, scale-size and type of garments
According to Annual Survey of Industries, in 2006, 28 per cent of total garment firms
are located in the north region of India namely, Delhi, Faridabad, Ghaziabad, Noida,
Gurgaon, Jaipur and Ludhiana. In the western region, 20 per cent of total firms are
located in Mumbai and nearby areas of Gujarat and the rest of the firms are located in
the southern region of India, namely, Bangalore, Chennai and Tirupur. In order to
study the variation in TFP in the firms across the regions, the selected firms are
classified as northern, western and southern regions of India. Further to identify which
scale size is comparatively more productive, we have classified the firms as small,
medium and large scale according to their investment in plant and machinery.
Comparison of TFP of individual firms is also made by the type of garments produced
by them. The comparison of TFP and its components by location, scale-size and type of
garments are discussed below.
3.3.1 Region-wise comparison. Figure 3 demonstrates the region-wise indices of TFP
change, technical efficiency change and technological change during 2003-2007. It is

Figure 3.
Region-wise TFP change,
efficiency change and
technological change in
the Indian garment
industry
observed that average TFP growth of the firms in the northern and southern regions TFP in the
are 7 per cent and 0.2 per cent respectively, whereas the western-region shows regress Indian garment
in the productivity. This indicates that the firms in the northern-region achieve faster
productivity growth as compared to the southern and western regions. On an average, industry
the productivity of firms in the western region has declined over a period of time.
Looking at the components of the TFP, we find that progress in the productivity in the
northern-region is due to improvement in technical efficiency, while the technological 155
change has regressed during the same period. This implies that the firms need
innovations in technology for further improvement in the productivity. It indicates that
the extent of automation in the industry is relatively low. Automation is required in the
industry because it boosts labour productivity, reduces labour requirement and
improves the quality of products. It also helps in meeting stringent delivery schedules
and producing standardised garments competitively.
Figure 3 also shows that average technical efficiency change in the western and
southern regions are 1.030 and 1.019; on the contrary the technological change has
declined in both the regions. Thus, low productivity in the firms is due to negative
technological change. Therefore, growth in the TFP has been only due to improvement
in the technical efficiency change.
3.3.2 Scale-wise comparison. Figure 4 demonstrates the trends in TFP growth and
its components of small, medium and large-scale firms during 2003-2007. It is observed

Figure 4.
Scale-wise TFP change,
efficiency change and
technological change in
the Indian garment
industry
JFMM that the productivity in the small-scale firms has increased by 5.1 per cent annually, it
14,1 has declined by 2.8 per cent and 2.6 per cent in the medium and large-scale firms
respectively during the study period. It indicates that average productivity has
decreased with the increase in scale-size. The TFP growth of small-scale firms is
mainly attributed by progress in the technical efficiency change. The technical
efficiency changes of small, medium and large-scale firms have increased by 6.7, 1.5
156 and 1.1 per cent respectively. This indicates that the small-scale firms are more
efficient in resource utilisation. The small firms always offer small lots, thereby
enabling them to make available a small order for garment of varying designs and
respond quickly to changes in fashion. Catering to small orders may not be economical
for a large firm, which would cause loss of productivity. It is also observed that the
TFP growth rates of medium and large scale firms are negative due to decline in the
technological change. In all the cases, the technological change has declined during
2003-2007. Therefore, positive growth in technical efficiency change occurred in the
garment firms is the major source of productivity growth.
3.3.3 Comparison by types of garments. In the industry, garments are basically
made in two sectors, namely, woven sector and knitted sector. Both of them have
progressed over the last decade but the knitted sector has overtaken the woven one in
terms of volume (Panthaki, 2002). The knitted sector contributes only 43 per cent of the
total garment industry.
It is observed from Figure 5 that the TFP growth of knitted firms is higher than the
woven ones. The TFP of the knitted firms have grown by 2.8 per cent annually during
2003-2007 whereas the woven firms show only 0.9 per cent TFP growth. Looking at
components of productivity growth, the woven and knitted firms show positive growth
of 4.1 per cent and 4.7 per cent per annum in technical efficiency respectively. On the
other hand, the technological change has declined by 2.2 per cent in woven industry
and 1.6 per cent in knitted industry. It indicates that technical efficiency progress in
both industries has contributed positively to the productivity growth.

4. Conclusion
The empirical results indicate that the Indian garment industry has achieved TFP
growth of 1.7 per cent annually during the entire period. Year-wise analysis shows that
the industry has achieved technological progress in only two years, while technical
efficiency change has been positive in most of the years. On an average, the
technological change has declined by 1.9 per cent during the study period; in contrast
the technical efficiency change has gained by 4.3 per cent. It suggests that the only
source of productivity growth in the industry is the improvement in technical
efficiency change. Firm-wise analysis shows that the 28 firms, out of 34 firms, achieve
positive growth in the technical efficiency change (catch up), on the other hand, only
eight firms show the progress in the technological change during the study period.
This implies that most of the firms’ TFP growth has been due to improvement in the
technical efficiency change rather than the improvement in their technological change.
We have also compared the TFP growth and its components by location, scale-size
and type of garments. Region-wise analysis indicates that the firms in the northern and
southern regions show the positive productivity growth; on the other side productivity
in the western region has declined. In all three regions, northern region is the most
productive. Looking at components of the TFP, all three regions show the positive
 TFP in the
Indian garment
industry

157

Figure 5.
Garment type-wise TFP
change, efficiency change
and technological change
in the Indian garment
industry

technical efficiency change, whereas the technological change has regressed during the
period under review. Lastly, we observe that small-scale firms are more productive
than the medium and large scale ones. Relatively higher productivity in the small-scale
firms is mainly attributed by the progress in the technical efficiency change. The
technological change has regressed the TFP growth in all type of firms. Garment-wise
analysis concludes that the knitted firms are more productive than woven firms. In
these industries, the technical efficiency change is positive and technological change is
negative during the entire period. To sum up, technical efficiency change has worked
for Indian garment firms in terms of obtaining positive TFP growth so far. In contrast,
declining technological change has curtailed the advantages of positive efficiency
change. In any case, to sustain the productivity growth, gains from both technological
change and technical efficiency change are necessary.

5. Policy implications
On the basis of findings of the study, some policy implications are drawn. The TFP
growth of 1.7 per cent per annum is the moderate growth rate. Looking at components
of TFP, the technological change of the most of firms show the declining trends during
the period 2002-2007. To make these firms more efficient and competitive, investment
JFMM in new technology is to be increased. These firms can avail the benefit of the
14,1 Technology Up-gradation Fund Scheme, which provides the loan to the industry at
lower interest rate to up-grade the existing technology. Apparel Export Promotion
Council of India can organize the awareness camp especially for the small-scale
garment manufactures to make them aware about the different Government policies
and schemes.
158 The results of the study also suggest that TFP in the medium and large-scale firms
have declined due to technological regress. In addition to this, the progress in the
technical efficiency in these firms is marginal in comparison with small-scale firms.
Hence, the medium and large-scale firms can improve existing technology with the
proper utilisation of the available inputs. The region-wise analysis shows that the
western and southern- region firms needs to improve their technical efficiency as well
as existing technology to achieve the progress in the productivity growth.

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About the authors

R.N. Joshi is working as a Senior Lecturer of Textile Technology in SGGS Institute of
Engineering & Technology, Nanded and presently registered as a QIP Research Scholar in
Indian Institute of Technology, Roorkee. His area of research is Productivity and Efficiency
Analysis of Textile and Clothing Industry and he has published papers in Journal of the Textile
Association and Indian Textile Journal. R.N. Joshi is the corresponding author and can be
contacted at: rnjoshitextile@yahoo.co.in
S.P. Singh is working as a Professor of Economics in Indian Institute of Technology, Roorkee.
He has published more than 50 papers in national and international referred journals, for
example, The Indian Journal of Labour Economics, Indian Journal of Economics, Journal of Rural
Development, The Asian Economic Review, Indian Development Review, Indian Journal of
Transport Management, International Journal of Economic Research, The Indian Economic
Journal, Journal of the Textile Association and Indian Textile Journal. His area of interest is
efficiency and productivity analysis, rural development, agricultural economics and labour
economics.

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