Why India’s critical textile sector, employing 4.5 crore people, is facing challenges

The textile sector is one of the critical sectors of the Indian economy, accounting for more than two per cent of the total GDP and more than 12 per cent of the manufacturing sector gross domestic product (GDP). The sector is also the second largest provider of employment in India, after agriculture. It provides employment to an estimated 45 million people directly and to another 60 million indirectly through allied activities. Not only is the textile sector highly labour intensive, it also employs unskilled and semi-skilled labour force and is also an important source of employment for women.

The textile sector has a diverse value chain spread across fibre to readymade garments. India is the sixth largest exporter of textile and apparel in the world, with four per cent share of the global trade in textiles and apparel. Considering the potential of the textile sector in generating employment and export revenues, the government has taken several measures to promote the sector, including for capacity building, technology upgradation, and to boost employment generation. In September, 2021, the Production Linked Incentive Scheme was launched to promote investments in manmade fabric and apparels.

However, recently the sector has been facing challenges. Domestic production has turned sluggish in recent months. While exports have suffered owing to preferential tariff treatment towards countries like Bangladesh and Vietnam, cheap imports from China and some other countries in certain segments are hurting the domestic industry.

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