India: Non-operational textile factories grows from 6% to 30% during 2000-2010

Market News

India: Non-operational textile factories grows from 6% to 30% during 2000-2010

About 30 % of total textile factories across India remained non-operational during 2000-2010 with Tamil Nadu alone having over half of the total non-operating textile factories, according to a recently concluded study by apex industry body Associated Chambers of Commerce and Industry of India (ASSOCHAM).

“Of the total 17,987 textile factories across India, about 12,688 factories were operational and about 5,300 were non-operational as of 2010-11,” according to a study titled ‘State-wise assessment of textile sector & recommendations,’ conducted by ASSOCHAM. “While the total number of textile factories grew at a compounded annual growth rate (CAGR) of about 5 % during the decade of 2000-01 and 2010-11, the non-operational textile factories grew at a whopping 23 % and the textile factories under operation grew at a CAGR of a meager 2 %,” said D.S. Rawat, national secretary general of ASSOCHAM while releasing the findings of the study.

Tamil Nadu, Gujarat, Punjab, Maharashtra and Uttar Pradesh (UP) together accounted for about 88 % of these non-operating textile factories, highlighted the ASSOCHAM study. “Tamil Nadu alone accounts for about 54 % of non-operating textile units followed by Gujarat (16 %), Maharashtra (over 10 %), Punjab (over 4 %) and UP (over3 %).” Gujarat has registered maximum growth of about 39 % CAGR in non-operational textile units i.e. from over 290 factories to over 2,800 factories during 2000-01 and 2010-11, followed by Punjab (35 %), Haryana (32 %), Himachal Pradesh (26 %) and Tamil Nadu (25 %).

“Low productivity, lack of advanced manufacturing technologies, lack of foreign investments, supply chain bottlenecks, lack of economies of scale, labor related challenges, issues arising due to a fragmented industry and weak brand positioning are certain key reasons for non-operation of textile units,” said Rawat. “Increased domestic competition together with competition from global players and high initial investment cost for state of the art production facilities are other emerging challenges being faced by Indian textile industry.”

The share of jobs lost due to non-operation of textile factories in India has increased from over 6% in 2000-01 to about 42 % in 2010-11. “This is a matter of grave concern as the organized textile sector apart from creating significant number of jobs of over 14 lakh, it also contributes about 4 % to the Gross Domestic Product (GDP) and 10.1 % to the total exports earnings,” added the ASSOCHAM secretary general.As per the ASSOCHAM Research Bureau, Tamil Nadu has incurred maximum loss of over two lakh job opportunities followed by Gujarat which has lost over one lakh employment opportunities due to non-operation of textile factories.

Technology upgradation, skill upgradation, inflow of foreign investments, partnership with international labels, brand promotion, flexible labor policy are certain key suggestions listed by ASSOCHAM to make the textile industry financially viable thereby minimizing the share of non-operational factories.