The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has suggested complete deregulation of India's handloom sector with flexibility in labour laws to help textile economy attract FDI, upgrade technology and generate employment in Chinese way which spurred spectacular growth in its apparel export industry.

In a SWOT Analysis on 'Textile Sector of India' undertaken by ASSOCHAM, it has been pointed out that the total FDI's  approval in India in last 15 years stood at Rs 40 billion of which less than Rs 3 billion were approved until recently.

This has happened because domestic textile sector continues to struggle under shackles of stringent laws and has yet to be deregulated as against China in which the actual FDI's are 50 times higher and its textile industry  and exports are doing remarkably well.

Releasing the Paper, the ASSOCHAM President, Sajjan Jindal said that the technology upgradation fund schemes (TUFs) for the sector was introduced in March 2006 but majority of investments that took place in textile sector went out of it.  This means that textile units had chosen to invest by not taking recourse to TUFs route.

Another disturbing feature is that FDI's attracted by domestic textile sector continue to remain quite low as in last 14-15 years, out of total FDI's attracted, textile sector contributed less than 2.5%, added Jindal.

He suggested that flexibility in labour laws in changed economic, commercial and fiscal policies be considered.  Amendments are required to help free outsourcing to promote investment in labour intensive and export oriented garment sector.  

Contract labour norms should be liberalised for textiles and garments so that units can hire labourers for a few months without the compulsion of having to absorb them permanently.

Infrastructure and power sector reforms should be undertaken at a high speed to  facilitate  the  smooth  functioning  of  the  industry.  India has high energy and capital costs, multiple taxation and low productivity, all of which add to production costs. As a result, textile and apparel products from India are less competitive than those of China and other developing countries.

The Paper points out that there are opportunities as well as threats for the Indian textile industry in the post-MFA era.

India has inherent strengths which can be capitalized on strong raw material base of cotton, man-made fibers, jute, silk, large production capacity (spinning 21% of world capacity and weaving 33% of world capacity) vast pool of skilled manpower, entrepreneurship, flexibility in production process and long experience with US, EU.

At the same time, there are weaknesses relating to fragmented industry, constraints of processing, quality of cotton, concerns over power cost, labour reforms and other infrastructure constraints and bottlenecks. India is likely to face intense competition both domestically and internationally from other low-cost exporting countries.

The Chamber is also of the view that Indian textiles are the largest single net foreign exchange earner of the country, contributing 19% of in total export earnings. It exprots textiles of diverse kinds from a wide variety of fibres-natural fibres, regenerated cellulose fibres and synthetic fibres.

Despite the competition from the low cost supplier like Bangladesh, China and Pakistan textile exports performed well during the recent years.

The textile sector occupies a unique position in Indian economy contributing to nearly a third of the country’s export earnings and accounting for around 14% of the total industrial production.

It provides direct employment to around 35mn people including manufacturers, suppliers, wholesalers and exporters of cotton textiles, handlooms, woolen textiles, etc. from the production of textile machinery and equipment, dyes and raw materials to the delivery of finished textiles, fabrics and garments.

There are 2,722 textile mills with a spinning capacity of about 37.34 million spindles.

The Indian textile industry continues to be predominantly based on cotton, with about 56% cotton and 34% other raw materials being consumed.