Textile Trade in Contemporary India

The Textile Industry of India is a very significant part of the Indian economy, being one of the best performing areas with respect to production, employment and foreign exchange. The Indian Subcontinent has been known for its textile exports across land and seas. The fine quality and varied designs of the fabrics that went out of the subcontinent were famous for centuries throughout Europe.

In the colonial period, however, like almost all other industries, the textile sector too suffered heavily. Earlier, India exported finished textile goods to Europe and other regions of the world, but colonial rule transformed India from a supplier of finished textile goods to the supplier of raw materials like fibres and yarns to be manufactured in British industries. These items were sold in Indian markets from which the British earned profits.

The domestic weavers and producers of garments suffered heavily as their space in the market was taken up by the more affordable, machine-spun European fabrics. Boycotting of these clothes and fabrics that came in from England and other parts of Europe in fact became a strong means of protest during the freedom movement. The focus on handspun or Khadi cloth was immense and the charkha, popularised by Mahatma Gandhi, became an important symbol of self-sufficiency.

Partition resulted in another blow to the industry as the raw material producing regions and the areas which had the factories were split by the new international borders. For instance, the majority of the places where jute and cotton were grown were now in East and West Pakistan respectively, while the mills processing the raw fibre fell within India. All of the jute mills came to India and only 14 out of the 394 cotton mills went to Pakistan. On the other hand, more than 80% of Jute producing areas were now in East Pakistan, and nearly all of the major cotton-producing regions were in and around Sind (in Pakistan). From exporting more than 2 million bales of cotton before partition, after 1947 India came to a state of importing cotton fibre at high costs. Moreover, there was an obvious shrinkage of the domestic market with the division of territory between the two nations, and so was there a fall of production capacity worth millions of pounds. Despite the shrunk demand, the production of cotton was still half of what was needed to meet the domestic market.

It fell upon the new Indian government to take extra care in order to reinforce the textile industry along with the others. Under the Nehruvian economic system, the key industries like telephone, iron and steel etc. were put under strict government control. Additionally, the Industrial Policy Statement, introduced in 1948, identified 18 industries of national interest. The textile industry was one of those and in 1951 it was covered by the Industries (Development and Regulation) Act which placed the textile industry under government protection through licensing of raw materials and imports.

Among other initiatives was also the attempt to reduce the dependency of the cotton-growing areas that were left in India on the monsoon rains. Irrigation facilities were improved so as to increase the production of cotton. From 1951 to 1997, the area under cotton cultivation increased more than fifty percent, and in the 1990s India was only behind China and the US in the production of raw cotton. In terms of development in the production scenario, ‘composite mills,’ where both spinning and weaving took place, were now established. The gradual shift from handlooms to power looms in the weaving centers was also focused upon.

At present the Indian textile industry enjoys certain advantages that include an abundance of raw material, competitive costs of labor, skilled human-force, and a growing market. The chart above shows the key facts of the industry as of 2019. India is the largest producer of cotton and jute, and the second-largest producer of silk in the world. Additionally, it is the only country producing five varieties of silk - Mulberry, Eri, Muga, Tropical Tussar and Temperate Tussar. It is the second-largest exporter of textiles and has a 5% share in the global trade of textiles and apparel.

This graph compares the import and export of textiles (in US dollars) to and from India in the last five financial years. As is clear from the diagram, the exports of Indian textile have been consistently more than its imports. Textile sector has thus been an important source of export earnings for the Indian economy. The textile industry contributes 2% of the Gross Domestic Product (GDP) and around 12% of the total export earnings. Over 40% of the shares of total textile exports are directed to the European Union and the United States. More than 15% of the exports are to China, United Arab Emirates and Bangladesh.

FTA or Free Trade Agreement refers to the various agreements between countries that determine the tariff, duties and other trade details and allows the creation of free trade areas between the agreeing parties. The figures help us get an idea of India’s textile export shares with the different FTA partner countries - Bangladesh, Indonesia, Vietnam, South Korea, Japan and China.

Being the largest producer of Jute in the world, India’s export in Jute has also been significant. The given graph shows India’s jute exports from 2014-2018 in million US Dollars. The major areas to which jute from India is exported are European Union, United States, Ghana, Saudi Arabia and Nepal.

The above table gives the details of the categories of Cotton exported in the years 2015-16. It helps in comprehending that textile trade includes export and import at each stage of production, right from fibre to garments and other articles like draperies, bed linen etc. (included in the ‘made-ups’ category). It also gives us an idea of the huge amount earned by India from the export of cotton alone.

Being one of the oldest industries of India, the textile industry is one of the most important sectors of the Indian economy today. After agriculture, it is the most significant employment generating area, directly and indirectly employing millions of people. India’s advantages of abundant raw materials, and skilled labour enhances its productive capacity, and the earnings from the exports of textile is a major income source for the country. Despite various trade regulations and protective restrictions on international trade imposed by the other countries in the past, over time India has managed to stand out as an important player in the global market of textiles and claim a prominent share in the textile trade.