63 CHAPTER 3 TEXTILES AND KHADI IN INDIA 3.1 Introduction This chapter looks at the aspects of textiles in India and tries to locate the status of the Khadi in the entire textile industry. First we look at the history of textiles in India in section 3.2. Next we move on to analyse the outcome of textile policy adopted in India after independence for the growth of the textile industry and how it has impacted the Khadi sector in section 3.3. Further we look at role of technological choices made in the five-year plans and its impact on the different sectoral outcomes of textile Industry in section 3.3.7. Finally we look at the Khadi and its current position visa-a-vie other small scale and textile industries in terms of production contribution, employment absorption etc. in section 3.4. Summary and conclusions are presented in section 3.5. 3.2 A Brief History Of Textiles In India The cotton handloom industry of India is one of the great manufacturing institutions of the world. Beginning with fragments of woven cotton material found in the ruins of Mohenjo-Daro, going on to supply the world with cotton fabrics from at least the time of the Roman Empire, and from then up to the end of the 18th century. Archaeological evidence from Mohenjo-Daro, establishes that the complex technology of mordant dyeing had been known in the subcontinent from at least the second millennium B.C. The use of printing blocks in India may go as far back as 3000 B.C., and some historians are of the view that India may have been the original home of textile printing. The export of printed fabrics to China can be dated to the fourth century B.C, where they were much used and admired, and later, imitated. There are testaments to the quantity, quality and variety of Indian cotton fabrics scattered through written records. Pliny, the Roman historian of the 1st century A.D. calculates the value of the cotton fabric trade between India and Rome at 100 million sesterces (equal then to 15 million rupees) every year, and complains that India is draining Rome of her gold. The thirteenth-century A.D. Chinese traveller Chau Ju-kua refers to Gujarat as a source of cotton fabrics of every colour and mentions that every year these were shipped to the Arab countries for sale. The discovery at Broach of a hoard of gold and
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CHAPTER 3
TEXTILES AND KHADI IN INDIA
3.1 Introduction
This chapter looks at the aspects of textiles in India and tries to locate the
status of the Khadi in the entire textile industry. First we look at the history of textiles
in India in section 3.2. Next we move on to analyse the outcome of textile policy
adopted in India after independence for the growth of the textile industry and how it
has impacted the Khadi sector in section 3.3. Further we look at role of technological
choices made in the five-year plans and its impact on the different sectoral outcomes
of textile Industry in section 3.3.7. Finally we look at the Khadi and its current
position visa-a-vie other small scale and textile industries in terms of production
contribution, employment absorption etc. in section 3.4. Summary and conclusions
are presented in section 3.5.
3.2 A Brief History Of Textiles In India
The cotton handloom industry of India is one of the great manufacturing
institutions of the world. Beginning with fragments of woven cotton material found in
the ruins of Mohenjo-Daro, going on to supply the world with cotton fabrics from at
least the time of the Roman Empire, and from then up to the end of the 18th century.
Archaeological evidence from Mohenjo-Daro, establishes that the complex
technology of mordant dyeing had been known in the subcontinent from at least the
second millennium B.C. The use of printing blocks in India may go as far back as
3000 B.C., and some historians are of the view that India may have been the original
home of textile printing. The export of printed fabrics to China can be dated to the
fourth century B.C, where they were much used and admired, and later, imitated.
There are testaments to the quantity, quality and variety of Indian cotton fabrics
scattered through written records. Pliny, the Roman historian of the 1st century A.D.
calculates the value of the cotton fabric trade between India and Rome at 100 million
sesterces (equal then to 15 million rupees) every year, and complains that India is
draining Rome of her gold.
The thirteenth-century A.D. Chinese traveller Chau Ju-kua refers to Gujarat as
a source of cotton fabrics of every colour and mentions that every year these were
shipped to the Arab countries for sale. The discovery at Broach of a hoard of gold and
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silver coins, mostly fourteenth-century and belonging to the Mamluk kingdom of
Egypt and Syria, suggests the maintenance of the advantageous trading system
recorded since Roman times whereby Indian textiles and other renewable resources
were traded for precious metals. Also in the thirteenth century A.D., Marco Polo
recorded the exports of Indian textiles to China and South East Asia from the
Masulipattinam (Andhra) and Coromandel (Tamil) coasts in the ‘largest ships’ then
known. It is conjectured that the initial development of this trade accompanied the
spread of Indian cultural influence in South-East Asia. Many spectacular Indian trade
cloths, most now two or three centuries old, have been treasured as heirlooms
throughout Southeast Asia into the twentieth century, making only rare appearances at
important ceremonies or at times of crisis. Prestige trade textiles such as Patola
(double ikat silk in natural dyes) from Patan and Ahmedabad, and decorative cottons
in brilliant colour-fast dyes from Gujarat and the Coromandel coast were sought after
by the Malaysian royalty and wealthy traders of the Phillipines. The port city of Surat
(in Gujarat) emerged as the major distribution point for patola destined for South-East
Asia, and was frequented by the ships of the Dutch East India Company. Textiles also
comprised a significant portion of the Portuguese trade with India. These included
embroidered bedspreads and wall hangings possibly produced at Satgaon, the old
mercantile capital of Bengal, (near modern Calcutta). Quilts of embroidered wild silk
(tassar, munga or eri) on a cotton or jute ground, combining European and Indian
motifs were comissioned by the Portuguese who had been attracted to Bengal, (as
traders had been since the early centuries A.D.), by the quality of the region's textiles.
J.H. van Linschoten, who was based in Goa as secretary to the archbishop in the
1580s A.D., observed that Cambay also produced silk embroidered quilts. Textiles
from Golconda and further south also found favour in Europe and South East Asia. In
the early 1600s, Dutch and English trading settlements were established in Golconda
territory. Produced in the Golconda hinterland, kalamkaris - i.e. finely painted cotton
fabrics were bought or commissioned from the port city of Masulipattinam. Buying at
source enabled the Dutch and English merchants to procure these textiles at rates
thirty per cent lower. 'Palampores' - painted fabrics based on the ‘tree of life’ motif
that had become popular in the Mughal and Deccan courts were also highly regarded.
The attractiveness of fast dyed, multi-coloured Indian prints on cotton (i.e. chintz) in
Europe led to the formation of the London East India Company in 1600 A.D.,
followed by Dutch and French counterparts. By the late 1600s, there was such
overwhelming demand for Indian chintz (whether from Chittagong in Bengal, or
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Patna or Surat, that ultimately French and English wool and silk merchants prevailed
on their Governments to ban the importation of these imported cottons from India.
The French ban came in 1686, while the English followed in 1701. Not all textile
producing centres were associated with ports. Several textile producing centres that
catered to the internal market, and to the overland international trade were located in
Northern and Central India, in the kingdoms of the Rajputs and the Mughals, each
with their own unique specialization. While Kashmir was well known for its woollen
weaves and embroidery, cities like Benaras, Ujjain, Indore and Paithan (near
Aurangabad) were known for their fine silks and brocades. Rajasthan specialized in
all manner of patterned prints and dyed cloths. Fine collections of Indian Textiles can
be seen in the Calico Museum in Ahmedabad and in the Crafts Museum in Delhi
(South Asian History, 2001). India's manually operated textile machines were
amongst the best in the world and the early textile machines produced in newly
industrialized Britain and Germany were modelled on the basis of these machines.
Cotton industry at one time employed millions of people at each stage, from
the growing of the plant through the ginning, carding and spinning, the warping,
sizing and weaving up to the dyeing, bleaching, printing, finishing and finally the
trading of the cloth. Today handloom industry is dispersed in villages and towns,
avoiding the pollution and ghettoisation of concentrated production that we see in
powerloom centres. Many of the producer regions are closely linked to their local
markets. At the dawn of the 21st century, handloom production is still the largest
employer in the country after agriculture, employing twelve and a half million
weaving families, not including the loom and reed makers, dyers, warp-winders,
sizers and other specialists who supply ancillary support. Weaving is not confined
solely to traditional weaving castes: when the industry thrives in one region, many
other non-weaving castes take it up (Uzramma, 2003).
Apart from its formidable size, the other great strengths of the handloom
industry in common with other craft industries are its low overheads and capital
needs, its variety and regional specialization, its versatility and adaptability, its
independence of generated power and of imports, and its smooth skill transfer
mechanisms. Analysis of handicrafts by Liebl and Tirthankar (2003) revealed that
market for handicrafts have gained significantly (the only exception is handloom)
contrary to the expectation of handicrafts to be substituted by modern manufacturing
industries under freer markets after 1990. The study also clearly shows the lack and
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weakness also common to artisanal industries: an absence of institutional support for
credit, research, technology, management and market development. What the
handloom industry has is a domestic market cutting across the social and economic
spectrum and the urban/ rural divide: cotton handloom fabric is still worn and used by
Indian people of all kinds and classes. This tenacious preference accounts for the
increase in handloom production over the years. Though the percentage of handloom
as a part of textile production has dropped from 24% in 1980-81 to 20% in 1999-
2000, the actual production has gone up from 3109 to 7352 million square meters
(Liebl and Tirthankar, 2003).
Geographical trends in the production of textiles and garments show a clear
pattern of the continuing relative (and, in some cases, absolute) decline of developed
country producers and a geographical shift of production to certain developing
countries, notably in East Asia and, to a lesser extent, in Mexico, the Caribbean,
Eastern Europe and some parts of the Mediterranean rim. In terms of exports only the
United States and Italy, of the industrialized countries, retained their shares of the
total world exports between 1980 and 2000. China dramatically increased its share of
world exports from 4.6 per cent in 1980 to 10.2 per cent in 2000. Both Korea and
Taiwan also doubled their shares of the world exports from 27 per cent in 1980 to 39
per cent in 2000 (Dicken, 2003).
World textiles exports are dominated by Asia (primarily East Asia) and
Western Europe. Together these account for more than 80 per cent of the total. In
terms of garments imports, the most striking feature is the over-whelming dominance
of the United States as the destination for almost one-third of the total. Second,
Japan’s share of garments imports almost tripled between 1980 and 2000 to be on a
par with Germany’s at around 9 per cent of the total. As in textiles, Western Europe
and Asia dominate garments exports (with around 75 per cent of the world total).
However, Asia is overwhelmingly the leading producer region (Dicken, 2003). Not
only are textiles and garments two of the most labour-intensive industries in modern
economies but also labour costs are the most geographically variable of the
production costs of the industries. There is a wide labour cost gap between different
countries. The spread is enormous, from over $10 per hour in the United States to 22
cents per hour in Vietnam, India around 33 cents (Dicken, 2003). Therefore it is
imperative for India to look at capturing some Global share in textile and garments
given its cost of labour and other advantages. It seems important to remember this
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history of quality and quantity when today Indian fabrics hold a mere 2.5% of world
textile trade, behind China, Pakistan and Turkey, and the main item of export is the
cheapest ‘grey sheeting’, made on powerlooms, and in which we are competitive only
on account of the low wages we pay (Uzramma, 2003). Further, we have the only
substantial household-based cotton textile industry in the world, and as part of that we
have a huge skill-bank in the millions of people capable of weaving and of making the
looms and accessories. We grow our own cotton and make our own yarn (Liebl and
Roy, 2003). Therefore it is imperative to enquire further into contribution of the
textile policy pursued in India after independence and what were its limitations which
contributed for such gloomy conditions in that sector.
3.3 Textile Policy In India
Study of textile Policy by Mishra (1993) in historical perspective reveals at least
five salient concerns that have motivated policy although their relative importance has
varied at different points in time. These are:
1. Regulation of inter-sectoral competition;
2. Provision of cheap cloth;
3. Fibre policy;
4. Modernisation; and
5. Sickness and Rehabilitation of mills.
3.3.1 Regulating Inter-Sectoral Competition And Its Impact
In the initial flush of Independence and the considerable influence of
Gandhian ideology at that time, the dominant opinion on the choice of `technology for
cloth manufacture was that the promotion of handlooms could achieve at one stroke
the twin objectives of generation of employment and the production of cloth for mass
consumption.
In 1950, the Government reserved certain areas of production, comprising a
wide variety of items of common use, for exclusive manufacture by the handlooms –
mills being legally prohibited from producing these items. This was followed up with
a cess on all mill-made cloth in 1952 to fund the subsidies for the handloom and
Khadi sectors.
The Kanungo Committee of 1954 was of the opinion that with the exception
of those textile items which required an ‘intricate body pattern’ there seemed ‘to be no
variety of fabric which the handloom industry could produce in a better quality or at a
lower price (consistent with a reasonable wage being paid to the handloom weaver
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and his assistants) as compared to the mill or the powerloom industry’. The committee
recommended a progressive conversion of handlooms into powerlooms through
organized effort over a period of fifteen to twenty years.
These views were sharply opposed by another official committee – the Karve
Committee, 1955, which was concerned with the role of the village and small
industries in the Second Five Year Plan. Not only did this Committee recommend the
freezing of both mill and powerloom output at existing levels (so that the entire
incremental demand for cotton cloth during the second plan period was to be met by
handlooms), it also recommended deferring any proposals for additional spinning
capacity in the mill sector, in order to promote the hand spinning sector. The
recommendations of the Karve Committee represent perhaps the most extreme
ideological position in favour of small, hand-operated techonology vis-à-vis power-
aided production.
In 1964, the report of the Asoka Mehta Committee resurrected the views of the
Kanungo Committee in recommending that the ‘powerloom sector be allowed to
acquire a paramount position in the decentralized sector of the textile industry.
Questioning the long-term viability of handlooms, it further urged that the regulatory
provisions regarding acquisition and installation of powelooms should be done away
with since they had not only proved ineffective but also given scope for serious
malpractices’.
With the unabated growth of powerlooms and its inherent conflict with
handlooms, it was only a matter of time before serious concern began to be voiced
about the survival of the handloom sector. In July 1974, B.Sivaraman Committee
pointed out that Government support for the handlooms had been inadequate and that
product reservation meant for the protection of the handloom sector had, in fact,
benefited the powerloom sector. Apart from institutional framework for the promotion
of handlooms, it also urged a set of wide-ranging fiscal measures to narrow down the
considerable cost advantages that the powerlooms had over the handlooms.
Towards this end, it envisaged the introduction of a legislation to statutorily
prevent the growth of powerlooms. The proposed legislation never saw the light of
day. In 1981, the Government announced a fresh textile policy which allowed a
marginal expansion of the powerloom sector, limited to Handloom Cooperative
Societies wishing to install powerlooms.
Notwithstanding these policy proclamations, the number of powerlooms grew
from an estimated figure of around six lakhs in 1981-82 to an estimated 8.36 lakhs
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(authorized as well as unauthorized) as on 1 January 1985. It was becoming
increasingly apparent that the growth of the powerloom sector could not be checked
through administrative fiat.
The 1985 textile policy made yet another major break from the past – it did
away with the virtual freeze on weaving capacity of the mills that had existed since
1956, although replacements of looms had been permitted for purposes of
modernization since 1978. It was a belated recognition of the fact that this freeze had
served only to inhibit the infusion of new entrepreneurship, consequently limiting
competition within the mill sector itself. It had been evident for quite some time that
the powerlooms required no protection from the mills and that the greater threat to the
existence of the handlooms came from the former, rather than the latter.
3.3.2 Cheap Cloth
Since the sixties, an important concern of textile policy has been the provision
of cheap cloth for the weaker sections of society. All the composite mills were
required to produce, at least, the stipulated minimum amounts of such cloth, fixed at
45 percent and later raised to 50percent in 1965 (commonly referred to as controlled
cloth), which was to be sold at prices fixed by the Government. The mills were
permitted to sell the non-controlled varieties in the open market.
As a result of repeated representations from the mill, which were obviously,
adversely affected by this measure, the scheme underwent several modifications. In
May 1968, the stipulated obligation was reduced to 25 percent. Subsequently, the
facility of transfer of obligation between mills was allowed and, in 1971, obligation
for individual mills was replaced by an industry-wide obligation.
The fact that the controlled cloth scheme was a major contributory factor in
the spread of sickness, in the organized mill sector, was officially recognized in the
textile policy statement of 1978. Apart from discontinuing the imposition of
obligation on the mills, the policy also envisaged a gradual transfer of the production
of such cloth to the handloom sector, so that the employment objective could also be
served. Till such time that such transfer was affected, the nationalized mills under the
National Textile Corporation (NTC) were to shoulder the major responsibility of
producing such cloth.
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3.3.3 Fiber Policy
Given the large area under cotton cultivation (the largest in the world) and the
millions of farmers whose livelihood depends on this crop, it is hardly surprising that
one of the major planks of India’s textile policy has been to ensure the predominant
use of cotton in textile manufacture and to limit the competition posed by man-made
fibres and yarns, particularly synthetics.
The use of non-cotton fibres in textile manufacture was sought to be curbed
both by fiscal as well as administrative measures. The Industries (Development and
Regulation) Act of 1951 introduced a fibre-based compartmentalisation between
different sectors of the textile industry. This not only prevented the cotton textile
mills from manufacturing pure non-cotton clothe, but also from using non-cotton
fibres and yarns in blends with cotton beyond a certain proportion.
More important than the administrative curbs on the use of man-made fibres
and yarns (which primarily affected the mills), has been the high ‘incidence of fiscal
levies’ on these items (especially on synthetic fibres and filaments) in limiting the
growth in consumption.
In the wake of the more liberal approach towards the use of man-made fibres
envisaged in the 1978 and 1981 textile policies, considerable additional capacities for
the production of synthetic fibres and filament yarns were sanctioned in the late 1970s
and early 1980s. This trend was maintained in the 1985 policy. With domestic
production rising rapidly, imports of man-made fibres and yarns have shown a sharp
decline in late eighties. On account of the marked consumer preference for non-
cotton and blended cloth, the consumption of synthetic fibres and yarn has grown
rapidly in spite of their high prices vis-à-vis cotton.
The Cotton Corporation of India (CCI) was set up in 1970 as a major public
sector trading agency to cushion the growers from a steep crash in prices and to
stabilize prices for the industry. The 1978 textile policy explicitly envisaged a price
stabilizing role for the CCI, so that prices were not allowed to fall below a prescribed
minimum or to rise above a predetermined ceiling through buffer stock operations.
On account of the logistical problems of operating a buffer stock in a commodity that
degenerates rapidly with time and the substantial costs involved, the buffer stock
concept was abandoned in the 1981 policy. The textile policy of 1985, therefore
envisaged ‘that the CCI, in addition to its traditional role of ensuring remunerative
prices for the growers, would also function as a price stabilization agency through
appropriate import-export interventions.
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3.3.4 Modernisation
Modernisation schemes have included the promotion of frame looms and
jacquard looms, training to weavers in new techniques. Several drawbacks with frame
looms that weavers have identified themselves such as less flexibility, having to
weave in worksheds as opposed to in the house, more physically difficult, and
substantial additional investment expenses which weavers cannot afford have limited
the use of modern technology.
3.3.5 Sickness And Rehabilitation
While some degree of sickness in the form of poorly performing units had
always existed in the industry, it did not become a serious policy issue till the
National Textile Corporation (NTC) was incorporated in 1968 with the primary
objective of managing sixteen sick mills taken over by the Government. The
Accumulated cash losses of the NTC mills alone had reached a staggering Rs. 800
crores approximately by 1984-85. Taking cognisance of this, the 1985 policy, for the
first time, came out explicit against nationalization or takeover of sick mills by the
Government. As a logical corollary, it envisaged the eventual closure of nonviable
units with adequate safeguard for workers’ interests. A Nodal Agency was to be set
up for the preparation and management of rehabilitation packages for sick mills that
were found to be potentially viable on careful screening. Further, a rehabilitation
fund was to be set up to provide interim relief to workers affected by the permanent
closure of nonviable units.
Mishra (1993) identifies four major factors that have crucially affected policy
outcomes:
1. Ideology
2. The issue of equity
3. The operation of pressure groups
4. Meta-policy
Planners in India had opted for an autarkic development strategy which gave
emphasis to investments in heavy industry for achieving growth objectives and small-
scale, labour-intensive manufacture of essential consumer goods for providing
employment to the rapidly growing labour force. What came to be known as the
Mahalanobis model, curiously attempted to combine essentially antithetical elements
of the Soviet model of development with its emphasis on comprehensive state
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planning and rapid industrialization with Gandhian economic beliefs in the efficacy of
essentially pre-industrial, non-mechanised techniques for the manufacture of yarn and
cloth.
Some of the major prescriptive elements emanating from such thinking were: (a) a
preference for direct, discretionary, physical controls over indirect, market-mediated
ones, operating through the price mechanism, (b) strong ‘export pessimism’ combined
with an open-ended commitment towards import substitution, and (c) the promotion
of equity commitment towards import substitution, and (c) the promotion of equity
through direct state interventions in favour of traditional labour intensive modes of
production and price controls. Such postulates naturally exercised considerable
influence on the evolution of textile policy.
These regulations, which came to be ‘embodied in the Cotton Textiles Control
Order of 1948 (CTCO), vested the state with wide-ranging powers to regulate prices,
distribution and production of textile products, including the installation of capacity to
produce them. In fact its ambit was progressively widened to encompass newly
emerging sectors (for example, man-made textiles) and to deal with changing
contours of policy. Once introduced, these controls, with the passage of time,
acquired an existence of their own-creating in the process powerful constituencies and
strong justifications in favour of their perpetuation.
Although the strait-jacket regime implied by the CTCO encompassed all
mechanized production of textiles, their actual impact did not extend much beyond
the formal sector due to the sheer administrative non-feasibility of enforcing these
controls over a large number of tiny units spread across a number of locations all over
the country. This stranglehold of controls was undoubtedly an important contributory
factor in the decline in competitiveness of the formal textile weaving sector. As a
logical corollary, the power looms which, at least de facto, were largely outside their
pale were able to thrive and flourish.
The issue of equity has always been on the forefront of the Indian economic
policy agenda. Thus the policy tilt in favour of traditional non-mechanised
production of cloth, although initially deriving its impulse from Gandhian beliefs, was
subsequently justified as an instrument for providing income and employment for the
economically weak sections of the population. In a similar vein, the concern for
meeting the clothing needs of the poor was the raison d’etre of the controlled cloth
scheme.
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Whether any equity objectives were indeed served by these measures is
another matter. What is significant is that the costs of meeting these distributional
objectives were imposed on other mechanized sectors of the industry (through fiscal
instruments as well as physical controls) instead of the society at large. The fact that
crucial trade-offs are involved between equity and efficiency and equally, between
expansion of short and long run employment, was not adequately appreciated until the
1985 policy.
Pressure from the large and vocal body of cotton growers has been a major
factor in the manifest policy bias against synthetic fibres. Similarly, pressure from
organized labour groups has prevented a rational policy on the closure of nonviable
mills and has provided the primary impetus for the takeover and nationalization of
such mills by the Government. Although the freeze in the weaving capacity in the
organized mill sector seemingly goes against mill interests.
To circumvent capacity restrictions and to take advantage of the substantially
lower wages as well as lower excise levies, the mills have, over time, forged strong
links with the powerlooms. There is good reason to suspect that a good part of the
powerloom sector is run by the mills by proxy.
Policy-making in this sector has, as a consequence, come to acquire most of
the classical attributes associated with what is commonly referred to as
‘incrementalism’. First, with the exception of the 1985 policy, textile policies have
shifted only marginally from the existing position over the years. Thus, changes have
never moved far from the status quo ante. Second, these policies have largely been
means-oriented- the means available at hand (in terms of financial and administrative
resources) have been more crucial in determining policy outcomes than the objectives
to be achieved. Third, textile policies have been largely remedial or reactive, dealing
with problems as they arose instead of anticipating them. The focus inevitably has
been on short-term goals without much regard for longer-term consequences. A good
example is the controlled cloth scheme making mills sick, which in turn had to be
nationalized to keep them operational. Finally, policies have, as a rule, been
fragmentary, in that they have viewed the policy arena as being comprised of a
number of largely independent segments rather than as an interconnected whole.
Thus, the likely cross-sectoral impact of policies has usually been overlooked; leading
often, to wholly unintended consequences. The most obvious example being the rapid
proliferation of power looms resulting from the restraints on mill capacity.
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3.3.6 Textile Policy Of 1985.
The accent in economic policy at that time was on liberalization, deregulation,
technological up gradation and increased competition. The 1985 policy statement
marks a major break from the past. It intended largely at the competition and
efficiency. It aimed at removing the barriers to entry and exit, flexibility in the use of
cotton and man-made fibers, equal treatment of the mills and powerlooms for fiscal
purposes, closure of non-viable units both private and public etc. Although its thrust
on some of the more contentious issues has been greatly diluted at the implementation
stage. This brings into focus the fundamental dilemma that policy-makers are
invariably confronted with – a policy that is technically and economically rational, is
often not politically so. A realistic policy must necessarily involve difficult trade-offs
between political and economic objectives.
3.3.7 Technological Choice And Decline Of Handlooms
The observations of Mishra and Srivastava (2004) are highly relevant here.
They observed that the issue of choice of technique was a matter of great debate in
India in 1950s and 1960s. The central issue, which was not settled at the time, and
one which still remains a great challenge for Indian policy makers is, what is to be
maximized – output or employment. The ambiguity was not strikingly reflected in the
textile policy. The textile policy attempted to promote mills and handlooms
simultaneously and consequently, ended up in contributing to sickness of mills and
decimation of handlooms. A third sector, namely powerlooms, came up to push both
sectors on the back foot and ran away with all incremental demand of textiles. It can
be debated how far the ascendancy of powerlooms was policy induced or an outcome
of gradual development of a different pattern of industrial organisations. But then is
no denying of the fact that more than half of cloth production in India originates from
powerloom sector. Here an intermediate technology (powerloom) is out competing
capital-intensive technique (mill sector) as well as a labour-intensive technique
(handloom) (Mishra and Srivastava, 2004).
The paper of Mishra and Srivastava (2004) examines the inter-sectoral
competition in textile industry, especially between handloom and powerloom, within
the choice of technique framework in an old textile city, namely Kanpur. This study
of inter-sectoral competition and ‘choice of technique’ in informal textile industry of
Kanpur shows that the conventional ‘choice of technique’ model fails to explain
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satisfactorily the continued proliferation of powerloom and gradual decimation of
handloom. Neither is the capital-intensive technique (powerloom) always growth
stimulating nor is the labour-intensive technique (handloom) always employment
maximizing. It appears that factor prices, i.e., high wage rate and low interest rate,
are among the principal reasons for the continued proliferation of powerlooms.
Moreover, the capital-intensive technique (powerloom) is also not always surplus
maximizing and thus growth stimulating. Rather, it emerges from their study that
there is a greater likelihood of the rate of reinvestible surplus going down with
increase in capital-intensity. One possible explanation of this observed anomaly
between empirical fact and theoretical propositions could be that choice of technique
is made in a particular socio-economic environment where exogenous factors are as
important as endogenous ones in determining this choice. The conventional model
excludes these exogenous variables (like policy regime and political economy
considerations) and focuses on output-employment trade off only. Consequently, its
results are tentative and causal relationships are tenuous. This study demonstrates
that raising of capital-intensity is no guarantee of higher surplus generation. The
proliferation of powerlooms in recent times is not explained by surplus maximization
motive. Therefore, we need to look beyond the narrow model of choice of technique
and due caution needs to be exercised in application of the model explaining the
dichotomous relationship between growth and employment.
3.4 Khadi In The Textile Industry
Next we look at the characteristics of Khadi in the overall small-scale industry
and textile sector to get a better view of its historical transit after Independence. Table
3.1 shows the changing relative importance of individual segments of the VSI sector
(Cols. 2 to 11, both in Sub- Tables 3.1.a and 3.1.b). As is expected, the modern sector
accounts for a lion’s share of out put while the bulk of employment is offered by the
traditional sector. In the modern sector, both output and employment shares have
expanded while the opposite has happened with the traditional sector. It seems that the
traditional sector is being pushed to a corner as its share in output is concerned; in
1996-97, it had contend with mere 8.36 percent share in out put against as high as
60.36 percent share in employment. Over time, the traditional rural industries have
steadily lost their ground to modern small-scale industries (like powerloom), whether
located in the rural or urban areas.
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An especially distressing picture emerges for the handloom sector where in
1996-97; a mere 2 percent share in out put was accompanied by as high as a 25.90
percent share in VSI employment. This sub-sector seems to serve as a dumping
ground for a lot of additional labour force, presumably because alternative
employment opportunities are not available to those already engaged in it, especially
to those weavers who have been in the craft for a long time and primarily due to lack
of education and alternative skills, cannot shift to other jobs. What explains the
weakening of this sub-sector during the past decade or so? Chadha (2000) observes
that while the inherent weaknesses of the handloom sector cannot be wished away, the
economic tug of war incessantly going on since the 1960s between the handloom and
powerloom sectors has played a decisive role in the secular decline of the former. The
house of Khadi thus poses questions about its future survivability, especially in the
context of the liberalized market regime that has been operating since 1991.
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Table 3.1.a: Output Expansion in Village and Small Industries (VSI) in India: 1973-74/1996-97 (Rs. In Crores). TRADITIONAL SECTOR (TS) MODERN SECTOR (MS) Year Khadi Village
Table 3.1.b: Employment and Productivity Expansion in Village and Small Industries (VSI) in India: 1973/1996-97. TRADITIONAL SECTOR (TS) MODERN SECTOR (MS) Seri- Culture
