Khadi Gram Udyog

Group 1

- Ashton Leo (B19010)

- Devagya Jha (B19014)
- Divya Tripathi(B19016)
- Nikita Gulgule(B19031)
- Snehal Tiwari(B19055)
Environmental Analysis
Khadi, an Indian concept, is a hand woven or spun fabric made out of cotton, sink, wool or
synthetic polyester by using the charkha or wheel.

In India, the khadi industry is mostly promoted by the KVIC (Khadi and Village Industries
Commission). KVIC is a statutory body that is formed by the Government of India under the
Ministry of MSME, which aims to provide economic uplift and employment in rural India.
Khadi Gram Udyog is the marketing arm of KVIC which markets the products manufactured in
the rural industries under the umbrella of KVIC. Other players that operate in the Khadi apparel
segment are Fabindia, Good Earth, Pureline Living, Patanjali Ayurved, Stylebaaj, etc.

The Environmental Analysis is therefore extremely important in order to understand the nature,
opportunities and weaknesses of the industry.

PESTLE Analysis is a comprehensive way to study the present scenario of the Khadi industry in
India.

Political Scenario

Regulatory Government created the All India Khadi and Village Industries Positive
Board which later culminated in the formation of Khadi,
Village and Industries Commission Act, 1956.

Regular amendments made to this Act show the willingness of

the Government to promote Khadi even today.

http://www.kvic.org.in/kvicres/act.php

https://economictimes.indiatimes.com/industry/cons-
products/garments-/-textiles/khadi-may-soon-open-its-maiden-
foreign-venture-beginning-with-
bhutan/articleshow/71634541.cms
Government Positive
Schemes Interest Subsidy Eligibility Certification Scheme (ISEC)

ISEC scheme, which applies only to Khadi manufacturers,

provides as the primary funding source for the Khadi
programme. Principal aim of this scheme is to provide loans to
Khadi manufacturers at a concessional rate of 4% per annum.

Rebate Scheme

For making the price competitive for both Khadi and Khadi
products with other textiles, Government has provided the
rebate on sales. Customers are given a standard rebate of 10%
throughout the year. They are also given an exclusive rebate of
10% in addition to the standard rebate on 108 days of the year.

Prime Minister's Employment Generation Program (PMEGP)

Khadi and Village Industries Commission(KVIC) acts as nodal

agency at the national level, who has implemented this scheme.
The upper limit on the cost of project/unit which is admissible
under this scheme is ₹ 25 lakhs and ₹ 10 lakhs for the
manufacturing and business/service respectively.

Khadi Reform and Development Programme (KRDP)

This programme aims to rejuvenate the Khadi sector through

various initiatives like increased incomes and employment
opportunities for weavers and spinners, to improve the
artisan’s welfare, achieving synergy with various village
industries and enhancing the sustainability of Khadi.

https://en.wikipedia.org/wiki/Khadi_and_Village_Industries_C
ommission

https://msme.gov.in/11-prime-ministers-employment-
generation-programme-pmegp

Economic
Growth of ● Sale of Khadi has grown from ₹ 2007 crore (FY 2016-
Khadi Market 17) to ₹ 2503 crore (FY 2018-19), registering a growth
in India of 25% .
● This is the only sector to achieve a growth in double
digits over the past three years both in production and
sales in Indian economy.
● There has been a significant jump in the average
growth of Khadi production. The growth was only
6.24% during the period 2004-14, but during the period
2015-17 it has shown a growth of 26.43%.

http://indpaedia.com/ind/index.php/Khadi_and_village_industr
ies

Khadi Khadi’s contribution to the country’s total exports is a mere

Exports 0.22% whereas the textile sector accounts for 15% of total
exports.

http://indpaedia.com/ind/index.php/Khadi_and_village_industr
ies

Factors that 1. Raymond has showcased grey fabric in their 150 stores
indicate recently. They had purchased around 2.5 lakh metres in
growth of total.
Khadi 2. A product line coined as “Khadi Peter England” is
domestic developed by Aditya Birla Fashion and Retail Ltd
market (ABFRL) in association with KVIC
3. KVIC has already started MoUs with Big Bazaar and
Cotton Bazaar from 2018 January onwards. Big Bazaar
has introduced Khadi Korners in their 7 stores in
Mumbai
4. Ritu Beri has been appointed as the advisor for KVIC
for innovating Khadi fabric into chic from March 2016.
5. For training at different Khadi institutions and for
bettering their designs, KVIC has entered an MoU with
NIFT.
 https://www.slideshare.net/apparelresources/indian-khadi-
industry

Factors that ● A textile event lasting about 20 minutes was

indicate choreographed by Gavin Najah, a noted fashion
growth of designer, in the Sandton Convention Centre in
Khadi Johannesburg on 2018 April. It was done to project
international Khadi as a trendy and modern style.
market ● KVIC products won a lot of accolades during the “India
Sourcing Fair” which was conducted in St. Petersburg
during 2018 March.
● Raymond is already selling Khadi products in their
international stores.
● Since Khadi provides sustenance to millions and is
environment-friendly, KVIC has approached the United
Nations to promote Khadi in their rehabilitation
programmes.
● KVIC has plans to open international outlets for Khadi
products to promote Khadi products in global markets.
They have received invitations from Dubai, Chicago,
Mauritius and South Africa.

https://www.slideshare.net/apparelresources/indian-khadi-
industry

Social

Employment KVIC has been instrumental in providing employment opportunities

to the masses. They have provided total employment to around
140.36 lakh people in 2017-18.

Around 48,398 projects were supported by PMEGP scheme which

will generate employment opportunities for 387,182 people.

https://www.business-standard.com/article/news-cm/khadi-and-
village-industries-provide-employment-to-140-36-lakh-persons-in-
2017-18-118122000888_1.html
Generating To generate awareness, interest and attraction among the population
awareness about of the country about Khadi and village industry products, KVIC has
traditional launched massive marketing development plans. Comprehensive
textiles reform packages have been implemented for the Khadi sector by the
Ministry of Micro, Small and Medium Enterprises (MSME). These
are aimed to increase capacity and up-gradation in 300 Khadi
institutions and also for improving their skills in marketing.

http://www.economicsdiscussion.net/india/role-of-khadi-and-
village-industries-commissin-kvic/19185

Technological

Comparison with Khadi industry has a rudimentary technology in both weaving and
other spinning spinning from its inception. It cannot be compared with high-speed
methods spinning and weaving machinery in the other modern textile
industries.

SSRN Journal, Technology in Khadi Industry, Gopinath

Perumula,Tata Institute of Social Sciences, September 20, 2010

DOI: 2675953

New Technology The last significant development that happened in the Khadi
weaving industry was the introduction of the New Model Chakra
and Ambar Wheel, which occurred in 1994. After that R&D has
been done in the industry, but there has been no significant
development happened which could have been useful in extending
chakra to large production units.

Textile Technology, Chapter7- New technology in Khadi

Legal
Debate over legal There have been debates surrounding whether Khadi should hold on
status to the registered trademark status or should be considered as a
Geographical Indication (GI). This debate mainly stems from the
history, origin and growth of Khadi over the years.

http://www.mondaq.com/india/x/725328/Trademark/KHADI+A+Tr
ademark+Or+GI

Environmental

Recyclable The spinning wheel and handlooms, which are the tools used in
equipment Khadi, are extremely simple and inexpensive to produce. They can
be constructed in a few hours with renewable resources like wood
or bamboo by a carpenter and are readily available to the
population, including the weakest of the society (Gandhi 1955). The
consumption of resources is very minimal when compared to large
scale textile industries.

http://www.vikalpsangam.org/article/khadi-production-in-india-a-
way-forward-to-green-economy/#.XamWZWbhVPY

No energy Khadi enterprises use human power as their energy source. Khadi
resources can be called as a green economy enterprise as it fulfils the second
required criterion by using minimal material and energy.

http://www.vikalpsangam.org/article/khadi-production-in-india-a-
way-forward-to-green-economy/#.XamWZWbhVPY

Porter’s Analysis of the Khadi Industry

Bargaining Power of Suppliers

Low

Number of The KVIC will always have an upper hand in deals with Low
supplier firms suppliers in India as they exist in small clusters and mini
industries, hence cannot stand out as individual players.
 http://www.khadigujarat.in/khadi.html

Input Substitutes KVIC’s products are all hand crafted and are all made in mini Medium
cottage industries and rural Industries which makes them
unique, specially for its customers who prefer to buy hand
spun products. But, Khadi has substitutes of machine made
fabrics produced in urban industries.

KVIC sells products which are clearly set apart from its
Degree of substitutes offered by the direct as well as competitors. The High
Differentiation of reason is the identity of products made by rural industries
Inputs which are completely natural and hand crafted.

Suppliers’ The switching cost aren’t that high for KVIC suppliers as Low
Switching Costs these are rural industries and multiple suppliers in each
category.

Possibility of There is no threat of forward integration at all from the Low

forward suppliers as individually these are very small units.
integration

Threat of New Entrants Low

Economies of KVIC is a perfect example of economies of scale as they are Low

Scale working on huge operations. No new other new entrant can
have such economies of scale.

http://planningcommission.nic.in/reports/peoreport/peoevalu/p
eokhdi.htm

Capital The investments for setting up a retailer like Khadi India Low
Requirements would be really high as the potential competitor will have to
raise funds for equal to or more than 7050 stores and make an
association of manufacturers.
www.kvic.org.in › kvicres › update › MARKETING ›
statewisesalesoutlets
Perceived Product The Manufacturers are an amalgamation of Rural Industries, Low
Differentiation which produce all carefully handcrafted products. The
product, for the texture and comfort it provides, is perceived to
be very different from the other fabrics.

https://indianexpress.com/article/explained/cloth-idea-brand-
what-is-khadi-to-whom-does-it-belong-5070625/

Access to Requires very strong distribution channel to reach rural India, Low
Distribution which would not be easy for a new entrant.
Channels
http://www.kvic.org.in/kvicres/update/KRDP/pan%20india%2
0market%20survey%20final%20report.pdf

Government Government of India has many favourable policies for KVIC Low
Policies like 10% rebate to customers. No new entrant would be able to
get such benefits from government policies.

http://www.kvic.org.in/kv/SFURTI%20%20Book%20_Final.p
df

Expected KVIC provides income and employment to millions of people Low

Retaliation thus a new entrant will have to face retaliation from them.

Bargaining Power of Buyers Low

Access to
Information The buyers are fascinated by products from Khadi India as High
they know the fact about these products which are handcrafted
and picked up from each corner of India to be sold at the
stores. These buyers are very knowledgeable about the
products.

https://economictimes.indiatimes.com/industry/cons-
products/garments-/-textiles/govt-looks-to-position-khadi-as-
indian-brand-with-bigger-play-
abroad/articleshow/64718530.cms
Quality of Product Quality reigns supreme for the customers High

https://scialert.net/fulltext/?doi=ajm.2014.86.97

http://www.kvic.org.in/kvicres/update/KRDP/pan%20india%2
0market%20survey%20final%20report.pdf

Price elasticity
The buyer is offered a 10% rebate by the Government Low
implying willingness to have lower profit margins which
translates to more bargaining power on part of the buyers

Switching Costs
Because of the low profit margins, there is added burden on Low
the buyer’s pockets when making a switch.

Buyer
Concentration Buyers are completely fragmented, hence lowering their Low
bargaining power

Threat of substitutes High

Buyers Almost 57.3% of the khadi consumers find it higher priced

propensity to and most of the consumers find substitutes to be of better High
substitutes quality with lower maintenance costs. This has led to high
propensity among the buyers for the substitutes.
https://www.google.com/url?sa=t&source=web&rct=j&url=htt
p://shodhganga.inflibnet.ac.in/bitstream/10603/2719/16/16_ch
apter%25209.pdf&ved=2ahUKEwiN2OCDkablAhXBheYKH
e2hBj8QFjAAegQIBhAC&usg=AOvVaw0XcwuGt6kqFpCm
_HJ217IP

Number of A number of substitutes to khadi are available to the

substitutes consumers. Substitutes such as clothes made from handlooms High
are more accessible to the consumers and the outlets at which
substitutes are sold are much more than the khadi outlets.

Perceived The most cited advantages of wearing Khadi are comfort/

Product texture, soaks sweat and looks unique and has a status of its Medium
Differentiation own. It also has a social message (following the gandhian way
 of life) attached to it. This unique attributes have differentiated
khadi from its substitutes.
https://www.google.com/url?sa=t&source=web&rct=j&url=htt
p://shodhganga.inflibnet.ac.in/bitstream/10603/2719/16/16_ch
apter%25209.pdf&ved=2ahUKEwiN2OCDkablAhXBheYKH
e2hBj8QFjAAegQIBhAC&usg=AOvVaw0XcwuGt6kqFpCm
_HJ217IP

Category rivalry
High

Industry Size Being in an unsaturated high growth market allows the

competitors to come out with new products without stealing High
other company’s customers. It also allows companies to enter
into foray without much resistance. According to KVIC, as
many as 375 new Khadi institutions were established after
2015 in some two-odd years, whereas the number of new
Khadi institutions established in 10 years' period between
2004 and 2014 was only 110.
https://m.economictimes.com/small-biz/sme-sector/khadi-
sales-up-24-pc-to-rs-2503-cr-in-fy18-
kvic/amp_articleshow/64419454.cms

Fixed Costs In order to respond to the threat of substitutes by reducing

costs, the Khadi industry sustains pressure on its operations by Medium
running it at full capacity to achieve economies of scale.