Case study 12

Knitwear Cluster Of Ludhiana

Mukesh Gulati, UNIDO

1. Executive Summary
The objective of UNIDO intervention in the Ludhiana cluster was to
address several issues plaguing the cluster, such as, poor
endowment of human resources, weak international market
linkages, response to a stagnating domestic market, low level of
competitiveness and weak institutional framework. The diagnostic
study conducted in 1997 focused on woollen knitwear sector.
However, during the implementation phase, the scope for strong
synergy was identified with respect to cotton-based knitwear units,
especially fashion knitwear, therefore, both sectors were targeted
during the actual implementation phase.

The strategy of the intervention has been to convince the units

about the scope for stronger cooperation to enhance business
capacity. The pressure towards experimentation was created
through benchmarking of the cluster.

The various cost cutting and productivity improvement measures

introduced in the cluster led to an estimated savings of USD 1.3
million in nearly 100 units. New market ventures at national and
international level led to an increased sale of USD 4 million by
around 25 firms. Around 50 units have made additional investment
to the tune of USD 6.25 million in new equipment. 45 new yarns
were also introduced in the cluster.

Five new training programmes were introduced, benefiting around

400 people and 75 firms. Of these 300 were women and 70 per cent
of them gained employment. Thus, entrenched socio-economic
issues of poverty and women empowerment were to some extent
addressed by employing women workers in formal knitwear units.

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New techniques to raise competitiveness like energy saving, store
management, better washing, etc. as well as marketing tools were
introduced in the cluster. Exclusive Buyer Seller Meet, (BSM), joint
participation in trade fair, creation of a resource centre, a consortia
were some of the initiatives taken.
A self-sustainable exporters’ association – Apparel Exporters’
Association of Ludhiana (APPEAL) was launched. A local association
of knitwear manufacturers – Knitwear Club has been guided
towards developmental activities. An umbrella organisation –
FEKTAA has also been constituted.

In retrospect one finds a distinct segregation of firms consisting of (I)

those who have realized the need for modernization and have
consequently addressed their limits to growth and (II) those that do
not realize the need for change or do not feel too threatened in their
present markets. The firms in the first category are lesser in number
but are the dominant players in the cluster. They will be the drivers
of change, and will eventually influence the second category.

The industry associations will play an important role in guiding the

firms in the coming years with focus on activities like HRD and
infrastructure.

On the marketing front, FEKTAA envisages to promote a “Made In

Ludhiana” brand to build consumer confidence in the products from
Ludhiana. Towards this, closer liaison and direct distribution
networks are to be maintained to establish direct contact with the
customers. Investments are likely to continue in new equipment.
Aggressive marketing initiatives are also likely to assume bigger
proportions. It is estimated that by end of year 2005, the cluster will
be able to double its output to USD 1778 million from USD 889
million in 2001.

Evolution, Turning Points and Current Status

The century old knitwear cluster of Ludhiana contributes in making

it a front running industrial hub in the state of Punjab. Its origin
can be traced to migrants from Kashmir, who settled in Ludhiana

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after a famine in 1833. These migrants were skilled in weaving fine
woollen fabrics and embroidery. Their products were
commercialised by local traders both within and beyond Punjab as
far away as France and England. These exports however stopped in
1870 with the Franco-Prussian war. Traders started looking for
other market avenues and in the process got orders from
government departments such as the army and the police. Traders
swiftly responded to this transition by employing skilled Kashmiri
weavers to produce sweaters, as the growing demand in this area
was perceived. The second world war reinforced this trend.

The first mechanized knitting machine was imported in Ludhiana in

1923 and later manufactured locally through reverse engineering.
Access to cheap local machinery helped cut cost, while stable
demand created the right environment for growth. This growth was
well supported by the government, which set up a small training
institute for knitting technology after the first world war. Tiny units
run by individuals or families dominated the growth. Over the years,
the cluster gradually increased its hold over domestic and export
markets. Mynamar was the most important market, till the
government of Mynamar imposed import restrictions in 1950.

With strong political relationship emerging between India and

Russia, focus shifted to Russia, which soon emerged as the single
largest export market for the woollens made in Ludhiana. The
breaking up of Russia into the CIS and the ensuing economic crisis
forced Ludhiana producers to explore new markets. Till this time,
the focus of the cluster largely remained on woollens and high wool
content products in the lower priced segments. Collapse of the
Russian market resulted in a major shakeout in the industry and
several of the leading manufacturers were forced out of business.
The crisis threw up a new generation of manufacturers, who were
inspired by manufacturers of Tirupur and Bombay specialising in
summer wear.

The Ludhiana knitwear cluster has 12,000 units in the value chain,
comprising among others 10000 knitting units, 500 processing
units, 100 machinery manufacturers and 200 spinners. Of the
10,000 knitting units, around 500 are of small and medium size

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 with 100/500
dyers hand flat knitting
and sub contracting machines
knitting units andbackward
provide one/twoprocess
computerised machines. The rest compose of household
support. Dye manufacturers, machinery manufacturers and level units
accessory
with 1 to suppliers
5 hand flatprovide requisite
machines. Theraw material.
cluster On thearound
employs domestic
front forward
400,000 linkage
people, is provided
about by intermediate
50000 hand flat knittingagents,
machines, 500
wholesalers
computerised andknitting
retailers.machines
Exports used
(fortocoarse
be through
knits)merchant
and 1500
exporters, buying agents and buying
automatic circular knitting machines. houses.
A number of technical support institutions like GPW, GITC&KT,
SGS India, etc. were present in the cluster, but had no interactions
The the
with totalindustry.
turnover A of the cluster
number is estimated
of associations at USD 500
like Knitwear million.
Club,
Ludhiana
Shawl Club,has a 95%
Wool share
Club, of theLDFA,
REHMA, domesticLSA,woolen market
etc. were only and a
major share in the cotton segment. Ludhiana is also a
proactive on statutory/fiscal issues. Barring a few (like Knitwear large
manufacturer
Club) which were andorganising
primary supplier of fabric to
one-off knowledge units based in
dissemination
Tirupur inlinkage
activities, SouthofIndia. On the with
associations export front,institutions
support nearly 25 like
% of the total
produceSBI,
SIDBI, is exported.
NSIC, etc.Thewasmajor
weak. export markets
The cluster are USA, EU, Middle
had limited
interactions with WWEPC, AEPC and SISI. The dynamics of the
East and Russia.
relationship among the cluster actors is depicted in the cluster map
below.1

3. Choice of Cluster

The choice of the knitwear cluster of Ludhiana for up

gradation Cluster Map Prior to Intervention
under the framework of the UNIDO Cluster Development
i. Programme wasmarket
The domestic (Indian) basedusedon
to bethe following
the stronghold of theconsiderations:
cluster. However in the mid/late nineties, the cluster started
losing due to the introduction of Chinese and branded products
with better range and quality and lower price. Exports were also
on the decline. Thus the prospects of this traditionally sound
cluster were threatened.

ii. The international experience (especially in clusters like Prato,

Carpi in the so-called “Third Italy”) provides an ideal environment
for cluster development. With a similar product range, but no
history of business cooperation (targeted joint action), Ludhiana
provided the ideal settings to identify the factors leading to the
growth of a cluster in a developing country.

4. Key Cluster Actors and their Linkages

Knitwear manufacturers (including manufacturers-

cum/traders/exporters) are at the core of the cluster. Spinners,
1 For a detailed description of the institutions see diagnostic study appearing as annex 1

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