Last Updated 17 Aug 2022

Small Scale Textile Industry

Category Clothing, Industries
Words 2921 (11 pages)
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India is the world’s second largest producer of textiles and garments after China. It is the world’s third largest producer of cotton—after China and the USA—and the second largest cotton consumer after China. The Indian textile industry is as diverse and complex as country itself and it combines with equal equanimity this immense diversity into a cohesive whole. The fundamental strength of this industry flows from its strong production base of wide range of fibres / yarns from natural fibres like cotton, jute, silk and wool to synthetic /man-made fibres like polyester, viscose, nylon and acrylic.

The growth pattern of the Indian textile industry in the last decade has been considerably more than the previous decades, primarily on account of liberalization of trade and economic policies initiated by the Government in the 1990s. In producer-driven value chains, large, usually transnational, manufacturers play the central roles in coordinating production networks. This is typical of capital- and technologyintensive industries such as automobiles, aircraft, computers, semiconductors and heavy machinery.

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Buyer-driven value chains are those in which large retailers, marketers and branded manufacturers play the pivotal roles in setting up decentralized production networks in a variety of exporting countries, typically located in developing countries. This pattern of trade-led industrialization has become common in labour-intensive, consumer-goods industries such as garments, footwear, toys, handicrafts and consumer electronics. Large manufacturers control the producer-driven value chains at the point of production, while marketers and merchandisers exercise the main leverage in buyer-driven value chains at the design and retail stages.

Apparel is an ideal industry for examining the dynamics of buyer-driven value chains. The relative ease of setting up clothing companies, coupled with the prevalence of developed-country protectionism in this sector, has led to an unparalleled diversity of garment exporters in the third world. Apparel is an ideal industry for examining the dynamics of buyer-driven value chains. India’s textile industry comprises mostly smallscale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. In this term paper, we study about the small scale Indian Textile Industry, its importance, role, roducts, finance, subsidies, attractiveness and the growth. We also present opportunities in this sector, the challenges, jobs and salaries in these industries.

History Of Indian Textile Industry

India has been well known for her textile goods since very ancient times. The traditional textile industry of India was virtually decayed during the colonial regime. However, the modern textile industry took birth in India in the early nineteenth century when the first textile mill in the country was established at Fort gloster near Calcutta in 1818.

The cotton textile industry, however, made its real beginning in Bombay, in 1850s. The first cotton textile mill of Bombay was established in 1854 by a Parsi cotton merchant then engaged in overseas and internal trade. Indeed, the vast majority of the early mills were the handiwork of Parsi merchants engaged in yarn and cloth trade at home and Chinese and African markets. The first cotton mill in Ahmedabad, which was eventually to emerge as a rival centre to Bombay, was established in 1861. The spread of the textile industry to Ahmedabad was largely due to the Gujarati trading class.

The cotton textile industry made rapid progress in the second half of the nineteenth century and by the end of the century there were 178 cotton textile mills; but during the year 1900 the cotton textile industry was in bad state due to the great famine and a number of mills of Bombay and Ahmedabad were to be closed down for long periods. The two world wars and the Swadeshi movement provided great stimulus to the Indian cotton textile industry. However, during the period 1922 to 1937 the industry was in doldrums and during this period a number of the Bombay mills changed hands. The number of mills increased from 178 with 4. 5 lakh looms in 1901 to 249 mills with 13. 35 lakh looms in 1921 and further to 396 mills with over 20 lakh looms in 1941. By 1945 there were 417 mills employing 5. 10 lakh workers. The partition of the country at the time of independence affected the cotton textile industry also. The Indian union got 409 out of the 423 textiles mills of the undivided India. 14 mills and 22 per cent of the land under cotton cultivation went to Pakistan. Some mills were closed down for some time. For a number of years since independence, Indian mills had to import cotton from Pakistan and other countries.

After independence, the cotton textile industry made rapid strides under the Plans. Between 1951 and 1982 the total number of spindles doubled from 11 million to 22 million. It increased further to well over 26 million by 1989-90.

A Small Scale Industry

In most of the developing countries like India, Small Scale Industries (SSI) constitutes an important and crucial segment of the industrial sector. They play an important role in employment creation, resource utilization and income generation and helping to promote changes in a gradual and phased manner.

They have been given an important place in the framework of Indian planning since beginning both for economic and ideological reasons. The reasons are obvious. The scarcity of capital in India severely limits the number of non-farm jobs that can be created because investment costs per job are high in large and medium industries. An effective development policy has to attempt to increase the use of labor, relative to capital to the extent that it is economically efficient. Small scale enterprises are generally more labor intensive than larger organizations.

As a matter of fact, small scale sector has now emerged as a dynamic and vibrant sector for the Indian economy in recent years. It has attracted so much attention not only from industrial planners and economists but also from sociologists, administrators and politicians.

Definition of Small Scale Industry

The Small Scale Industries Board in 1955 defined, "Small-scale industry as a unit employing less than 50 employees if using power and less than 100 employees if not using power and with a capital asset not exceeding Rs. 5 lakhs". 'The initial capital investment of Rs. lakhs has been changed to Rs. 10 lakhs for small industries and Rs. 15 lakhs for ancillaries in 1975. Again this fixed capital investment limit was raised to Rs. 15 lakhs for small units and Rs. 20 lakhs for ancillary units in 1980. The Government of India in 1985 has further increased the investment limit to Rs. 35 lakhs for small-scale units and 45 lakhs for ancillary units. Again the new Industrial Policy in 1991 raised the investment ceilings in plant and machinery to Rs. 60 lakhs for small-scale units and Rs. 75 lakhs for ancillary units.

As per the Abid Hussain Committee's recommendations on small-scale industry, the Government of India has, in March 1997 further raised investment ceilings to Rs. 3 crores for small-scale and ancillary industries and to Rs. 50 lakhs for tiny industry.

The Textile And Apparel Supply Chain Trends In Production- Yarn And Fabric (small Scale Industries)

Yarn and fabric production has been annually growing at 1. 9% and 2. 7% respecitvely since 2000. Yarn production has increased from 3,940 mn kg in 1999? 00 to 4,326 mn kg in 2004? 05. Man? made yarn has driven much of this, showing a robust growth of 4. % in the last five years. Spun yarn production and the cotton yarn sector have also grown, albeit less impressively, recording growths of 2. 4% and 0. 6% respectively. Fabric production has been growing at 2. 7% annually between 2000 and 2005, driven primarily by the smallscale, independent powerloom sector. Growth in the 100% non? cotton segment touched 5%, followed by cotton fabric at 1. 5% and blended fabric at 0. 3%. Fabric production touched a peak 45,378 million sq mtrs in 2004? 05, and in Nov 06, production recorded a robust 9% growth compared to the corresponding period in the previous year.

Structure Of India’s Small Scale Textile Industry

The textile sector in India is one of the worlds largest. The textile industry today is divided into three segments:

  1. Cotton Textiles
  2. Synthetic Textiles
  3. Other like Wool, Jute, Silk etc.

All segments have their own place but even today cotton textiles continue to dominate with 73% share. The structure of cotton textile industry is very complex with co-existence of oldest technologies of hand spinning and hand weaving with the most sophisticated automatic spindles and loom.

The structure of the textile industry is extremely complex with the modern, sophisticated and highly mechanized mill sector on the one hand and hand spinning and hand weaving (handloom sector) on the other in between falls the decentralised small scale powerloom sector. Unlike other major textile-producing countries, India’s textile industry is comprised mostly of small-scale, nonintegrated spinning, weaving, finishing, and apparel-making enterprises. This unique industry structure is primarily a legacy of government policies that have promoted laborintensive, small-scale operations and discriminated against larger scale firms: ?

Composite Mills Relatively large-scale mills that integrate spinning, weaving and, sometimes, fabric finishing are common in other major textile-producing countries. In India, however, these types of mills now account for about only 3 percent of output in the textile sector. About 276 composite mills are now operating in India, most owned by the public sector and many deemed financially ? sick.? In 2003-2004 composite mills that produced 1434 m. sq mts of cloth. Most of these mills are located in Gujarat and Maharashtra. ? Spinning

Spinning is the process of converting cotton or manmade fiber into yarn to be used for weaving and knitting. This mills chiefly located in North India. Spinning sector is technology intensive and productivity is affected by the quality of cotton and the cleaning process used during ginning. Largely due to deregulation beginning in the mid-1980s, spinning is the most consolidated and technically efficient sector in India’s textile industry. Average plant size remains small, however, and technology outdated, relative to other major producers.

In 2002/03, India’s spinning sector consisted of about 1,146 small-scale independent firms and 1,599 larger scale independent units. ? Weaving and knitting The weaving and knits sector lies at the heart of the industry. In 2004-05, of the total production from the weaving sector, about 46 percent was cotton cloth, 41 percent was 100% non-cotton including khadi, wool and silk and 13 percent was blended cloth. Three distinctive technologies are used in the sector – handlooms, powerlooms and knitting machines.

Weaving and knitting converts cotton, manmade, or blended yarns into woven or knitted fabrics. India’s weaving and knitting sector remains highly fragmented, small-scale, and labour-intensive. This sector consists of about 3. 9 million handlooms, 380,000 ? powerloom? enter-prises that operate about 1. 7 million looms, and just 137,000 looms in the various composite mills. ?Powerlooms? are small firms, with an average loom capacity of four to five owned by independent entrepreneurs or weavers. Modern shuttleless looms account for less than 1 percent of loom capacity. Fabric Finishing Fabric finishing (also referred to as processing), which includes dyeing, printing, and other cloth preparation prior to the manufacture of clothing, is also dominated by a large number of independent, small-scale enterprises. Overall, about 2,300 processors are operating in India, including about 2,100 independent units and 200 units that are integrated with spinning, weaving, or knitting units. ? Clothing Apparel is produced by about 77,000 small-scale units classified as domestic manufacturers, manufacturer exporters, and fabricators (subcontractors).

Analysis Of The Materials

India’s textile industry comprises mostly small-scale, non-integrated spinning, weaving, finishing, and apparel-making enterprises. Wool: India’s wool industry is primarily located in the northern states of Punjab, Haryana, and Rajasthan. These three states alone account for more than 75 per cent of the production capacity, with both licensed and decentralized players. The woolen industry provides employment to approximately 1. 2 million people. Silk: India is the second largest producer of silk in the world, contributing about 18 per cent to global production.

Growing demand for traditional silk fabrics and exports of handloom products has spurred growth in silk demand. Jute: Jute industry occupies an important place in India’s economy, being one of the major industries in the eastern region, particularly in West Bengal. It supports nearly 4 million farming families, besides providing direct employment to 260,000 industrial workers and livelihood to another 140,000 people in the tertiary sector and allied activities. Handloom: The handloom sector is based on Indian traditional crafts. It employs nearly 7. million people and contributes 13 per cent to cloth production.

Attractiveness Of The Enterprise - The Thrust Areas

Textile Industry is unique in a sense that despite it being mainly small-scale, it follows the principles of large scale industries.

Innovative marketing strategies

Diversification of product Enhancement of textile oriented technology Quality awareness Intensifying raw materials Growth of productivity Increase in exports Financing arrangements Creating employment opportunities Human Resource Development

Growth And Opportunities

The future outlook for the industry looks promising, rising income levels in both urban and rural markets will ensure a rising market for the cotton fabrics considered a basic need in the realm of new economic reforms (NER) proper attention has been given to the development of the textiles industry in the Tenth plan. Total outlay on the development of textile industry as envisaged in the tenth plan is fixed at Rs. 1980 crore. The production envisaged in the terminal year of the Tenth plan are 45,500 million sq metres of cloth 4,150 million kg of spun yarn and 1,450 million kg of man made filament yarn.

The per capita availability of cloth was 28. 00 sq meters by 2006-2007 as compared to 23. 19 sq meters in 2000-01 showing a growth of 3. 19 percent. Some of the factors that led to growth of this sector are: The textile industry has been doing extremely well during the last few years in terms of production & export and has been investing heavily in expansion and modernization of capacity. India has been experiencing strong performance in the textile industry, across different segments of the value chain, from raw materials to garments. Domestic production has been growing, as well as exports.

High operational efficiency in spinning and weaving Low-cost skilled labor Large and growing domestic market Easy availability of raw materials State-of-the-art design capabilities Well-established network of related and supporting industries Sophisticated machines of higher speed and production capability Lower raw material costs, wastage costs and labor costs when compared to other countries Fully developed textile value chain extending from fiber to fabric to garment exports Favorable demand conditions Managements with business background

Presence of qualified technical personnel Large domestic market Availability of testing facilities

Jobs And Salaries

Small scale industries are labor intensive and they provide a large number of jobs but the salaries are not so high. Small scale textile firms don’t produce sufficient profit so as to give high salaries to the laborers. But, most of the jobs have job security because of the perennial nature of the work. The workers are skilled and hence not easily replaceable. A very important point when it comes to small scale textile industries is the large involvement of women and hence a great women employability ratio.

Challenges For Small Scale Textile Industries

The small scale Indian textile industry is reeling under manifold problems. The major challenges that the industry faces:-


Sickness is widespread in the Indian textile industry. After the engineering industry, the cotton textile industry has the highest incidence of sickness. As many as 125 sick units have been taken over by the Central Government.


The plant and machinery and technology employed by a number of units are obsolete.

The need today is to make the industry technologically up-to-date rather than expand capacity as such. This need was foreseen quite some time back and schemes for modernization of textile industry had been introduced.

Government Regulations

Government regulations like the obligation to produced controlled cloth are against the interest of the industry. During the last two decades the excessive regulations exercised by the government on the mill sector has promoted inefficiency in both production and management. This has also resulted in a colossal waste of raw materials and productive facilities.

For example, the mills are not allowed to use filament yarn in warp in order to protect the interest of art silk and power loom sector which use this yarn to cater to the affluent section of society.

Competition from other Countries

In the international market, India has been facing severe competition from other countries like Taiwan, South Korea, China and Japan. The high cost of production of the Indian industry is a serious adverse factor.

Labor Problems

Small scale industries are labor intensive. The Indian Textile Industry is frequently plagued by labor problems.

The very long strike of the textile workers of Bombay caused losses amounting to millions of rupees not only to the workers and industry but also to the nation in terms of excise and other taxes and exports.

Accumulation of Stock

At times the industry faces the problems of very low off –take of stocks resulting in accumulation of huge stocks. The situation leads to price cuts and the like leading to loss or low profits.


The Indian textile industry is currently one of the largest and most important sector in the economy in terms of output foreign exchange earnings and employment in India.

The Textile industry has the potential to scale new height in the globalized economy. The textile industry in India has gone through significant charges in anticipation of increased international competition. The industry is facing numerous problems and among them the most important once are those of liquidity for many organized sector units, demand recession and insufficient price realization. The long-range problems include the need for sufficient modernisation and restructuring of the entire industry to cater more effectively to the demands of the domestic and foreign markets for textiles as per the needs of today and tomorrow.


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