Textile Industry

India is set to become the world’s largest producer of cotton in 2014-15, yet India faces numerous problems thanks to local and global factors. Critically examine. (200 Words)

Despite a bumper harvest and a rapid increase in production over the last decade due to technology improvements, the cotton industry in India faces various problems.
Low international demand: Cotton in India is a very export oriented industry. As
such, various global and local factors affect it:
  1. China, the biggest market of cotton yarn for India, is reducing its imports to consume its own stockpile of cotton produced domestically.
  2. Increasing international competition: Major importers like Bangladesh are also finding it cheaper to import from countries like Pakistan and USA.
  3. Slump in the EU: About 60% of our cotton and textiles are exported to the EU which is facing a recession which has also resulted in low demand.
  4. Removal from the Focus Market Scheme: Cotton producers no longer enjoy the benefit of reduced freight and transportation costs, raising prices and hence making the productive less competitive internationally.
  5. Competition with cheaper synthetic fibres.
There are other, more long term factors at play that contribute to the present predicament:
  1. Low yield: Although we are set to become the largest producer, our yield is roughly half of that of the USA which has a much lower under cultivation.
  2. Rain fed: Except for the Punjab, Haryana and Rajasthan regions which enjoy a healthy network of canals, most of the regions in Central India which make the bulk of our cotton are rain-fed.
  3. Transgenic varieties, fertilizers and pesticides have been excessively used to spurt production. This has contributed to adverse effects like deteriorating soil health. pollution of groundwater and freshwater resources, harmful effects on beneficial species of insects. Deepwater drilling is also practiced which has depleted the water table.
The government has tried to alleviate these problems, with steps like:
  1. Market intervention: CCI is mandated to procure cotton from the farmers if Market prices fall below MSP.
  2. Power subsidy to cotton farmers.
For the long term though, the focus should be on
  1. Temporarily increasing MSP to provide momentary relief
  2. Exploring new markets for export reducing over-reliance on tradition customers
  3. Trying to migrate individuals from farming to industry  to spur manufacturing.
  4. Promoting alternative and profitable crops other than cotton, and focusing on increasing the yield on existing areas.
What are the important factors that determine the location of an industry? With suitable examples, examine the factors responsible for the location and growth of cotton industry around the world. (200 Words)
Factors that affect the location of an industry can be broadly divided into two categories
1).Geographical factors
2). Non-geographical factors.
GEOGRAPHICAL FACTORS:
  • Land : cheap and easy land acquisition procedures is very important;
  • Raw materials: industries tends to be located where there is easy availability of raw materials
  • Power
  • Labour
  • Transport
  • Market
  • Water
  • climate
NON-GEOGRAPHICAL FACTORS:
  • Capital;
  • Government policies: investment friendly government attracts industries;
  • Insurance , banking facilities and financial institutions;
  • Stable economic and political situation.
Factors responsible for the location and growth of cotton industry around the world are:
  1. climatic conditions apply much influence on the location of cotton industry. A considerable humid condition is must otherwise the cotton yarns would break up during the spinning process. Dry conditions are detrimental to cotton production
  2. Raw cotton availability is undoubtedly essential. But with improvement in transportation and cross border linkages, there has not been much difference in the prices of raw cotton near the farms and far away. So, it has in certain sense lost much importance in determining industry location.
  3. Cotton industry requires significant power .Therefore it is generally located near power plants.
  4. The textile industry is preferably set up where market is close and easily accessible. Restrictions and regulation on imports and exports along with duties affect the choice of location of cotton industry.
All these are the reasons why we see cotton industries concentrated in coastal areas in India like Mumbai, Tamil Nadu and Gujarat. They provide humid conditions, good markets and have excellent port facilities. But, no single set of factors are responsible for cotton industry location globally. Factors in India and Britain with regard to cotton industry location are significantly different. But factors like power, climate and labour are key and true for everywhere.
The crisis-ridden textile sector, being labour-intensive, should have been an ideal candidate for a push as part of the Prime Minister‘s pet ‘Make in India’ initiative. Critically comment. (200 Words)
India’s textile sector is one of the major industry and has generated huge employment for both skilled and unskilled labor in both rural and urban areas. The importance of textile sector is characterize by strong base for production of raw materials and availability of labor at low costs. With effective implementation of sector related policies, substantial financial support from government and creation of investment opportunities, it has immense potential to contribute significantly in ‘Make in India’ program.
The main reasons for textile industry who must have been leader in ‘Make in India’ initiative’ are:-
  1. Capacity and comparative advantage– India has second largest manufacturing capacity globally. The textile sector in India enjoys a comparative advantage in terms of skilled manpower and cost of production over major textile producers. Through active participation in initiative, it’ll enhance revenue earnings.
  2. Employment opportunities;- Both in urban and rural areas, the availability of workers in concerned sector provides a platform to investors to utilize market facilities and contribute to significantly in production process. Thus, making their product in India has more benefits at low cost of production.
  3. Trade policies – Favorable trade policies and superior quality will drive textile  exports. It’ll help in boosting export earnings and minimizing current account deficit. Also, 100% FDI is allowed under automatic route in textile sector in welcome step . Government must ensure to actively participate in different multi-national forums.
  4. Technology– Increase use of advanced technologies and better access to various innovative practices will help sector. The handloom sector needs more investment and proper management by government as well as private entities.
However, their persists significant challenges on path towards its bigger   responsibilities:-
  1. Mismatch in sector– There are some large and modern factories in these segments, but most of production is in fragmented small units , which cater to  local market. This mismatch is major drawback to industry. India is unable to diversify.
  2. Labor laws:– Rigid labor laws and inflexibleness in their reforms process is major hurdle which is obstructing the growth of industry below its potential.
  3. High rates– Cost of cotton production is lower in India. However, due to improper management by state agencies and other vested interests, the rates of Indian cotton products are charged high in global market which hurt the export competitiveness of cotton produced in India.
  4. Erratic power supply– Power supply to most textile mills is inadequate which adversely affects its production.
Thus, the opportunities and dynamic capabilities existing in textile sector is immense which can contribute substantially to ‘Make in India’. However, the challenges and pending issues must be resolved to realize its full potential in PM’s pet initiative.
It is reported that the government is planning to repeal the Handloom (Reservation of Articles for Production) Act, 1985. Examine why this act was enacted and what would be the consequences of repealing this act. (200 Words)
The handloom act, 1985 was started as a measure to protect the traditional handloom sector from power looms and mechanised sector. It provides for reservation of certain
articles to be manufactured by handlooms only and it extends over the whole territory of India. In addition to this, Central Assistance is also given to state governments to set up an Enforcement Machinery in the state to ensure that there is no violation of the handlooms act.
Consequences of repealing it:
  1. The repealing will result in the unemployment of a large section of population engaged in it, as the sector will be overtaken by the mechanised sector
  2. It is a symbol of our heritage and the repeal will make it prone to be lost forever.
  3. People are more attracted towards the original handloom produced garments, which also reaps a large revenue for the govt, which will be lost on its repeal
  4. It has a low carbon footprint, and the repeal will give an impetus to mechanised sector, which will further increase India’s carbon footprint
However, there are certain contrary views to it, which support the amendment:
  1. Handlooms don’t have economy of scale, so can’t compete with modern industry.
  2. Handloom materials are costly
  3. Labours in it are generally unorganized, which in power loom big industries will get more security.
Instead of repealing the act and crippling the sector, the govt needs to invest more so as to strengthen its base, while giving more incentives to the workers and encouraging even more innovation in the sector. The demand for handicrafts has only increased in recent times, and hence, obstructing the sector with such amendment would hamper a well grooming economic activity in the economy.
In fact, with huge production revenues as well as high employability, this sector is one of the best contenders for the MAKE IN INDIA objective. It can be used by the country as a tool for cultural diplomacy, given there was a time in history when indian handicrafts were one of the favourite among the global community.