The Hindu Business Line : Looming trouble

That the textile industry is India’s largest employer after agriculture implies that even a moderate drop in exports can have serious socio-economic consequences.

Recession in the West is set to hit the Indian textile industry hard. The Apparel Exports Promotion Council expects a 10 per cent drop in orders due to the slowdown. When factories idle, lakhs of workers may find their wages pared, thousands may lose their jobs. So severe is the global erosion of consumer confidence that even a weak rupee is of no help. This has impacted textiles, garments and yarn output. Textiles account for about 11 per cent of India’s exports and 4 per cent of Gross Domestic Product. Half of India’s textiles and apparel output is exported to the US and Europe. Therefore, the sector is more vulnerable to changes in exchange rate and OECD-led shocks than most others.

That the textile industry is India’s largest employer after agriculture, providing a livelihood to 35 million, implies that even a moderate drop in exports can have serious socio-economic consequences. Fluctuating export demand is not the industry’s only problem. The unorganised sector in textiles and apparel, which accounts for three-quarters of the workforce, is too fragile and inefficient to cope with sudden downturns. This situation can be remedied by promoting the organised vis-a-vis the unorganised sector. Scale economies will raise labour productivity, leaving producers with more resources to cope with shocks. Tax and credit incentives to modernise have started to show results in textiles, resulting in an investment of Rs 1.05 lakh crore since 2004. Restructuring and modernisation can cause job losses in the short run, even as it finally leads to higher employment and productivity. The challenge is to sustain investment and growth in the sector, while minimising the pain of transition. Given the number of people involved, this is no easy task. Yet, there is no alternative; workers will lose out, anyway, if the industry continues to remain fragmented.

Capital can move to productive uses only if workers have the means to cope with unemployment. The Board for Industrial and Financial Reconstruction has not been effective in dealing with labour disputes arising out of closure of textile units, as litigation often drags for years on end. One of the reasons is the absence of a clear-cut legal and policy framework to deal with closures and unemployment. The fact that unorganised sector workers have virtually no social security cover to fall back on makes matters worse, for both labour and capital. The scope of the Textile Workers’ Rehabilitation Fund Scheme (TWRFS) should be enlarged to apply to a larger number of textile workers. This is a bare minimum, in the absence of social security.

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India out of Top 5 in apparel exports
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PM’s intervention sought on cotton, yarn price rise

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