Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /25

Structural Change, Technology and Employment

in the Indian Textile Industry :1980-2010*

Bindu Oberoi **
Indraprastha College for Women
Delhi University, Delhi
E-mail : [email protected]

Submitted : 21.04.14; Accepted : 17.09.14

Abstract:
The textile industry in India experienced a recession from the mid-1960s to the 1980s
when the demand for textile products almost stagnated. However, a significant increase
in the per capita consumption of textiles along with a substantial increase in exports
of textiles reversed this trend after the early 1990s. It was expected that the growth of
output and exports of the industry would lead to an increase in employment in its more
labour intensive segments. However, the experience of the economy since the 1990s
suggests that there was hardly any growth in the number of workers employed by the
Indian textile industry. This paper analyses the reasons for the unsatisfactory performance
of the Indian Textile Industry on the employment front. The paper argues that changes
in the structure of the textile industry and technology use since the 1990s have adversely
affected the level of employment in this industry.
Keywords:
Usual status employment, inter-sectoral shifts, spinning mills, composite mills, real gross
value added, technological modernisation, productivity.

1. Introduction
One of the most striking characteristics of growth of India’s economy during the
post-liberalisation period has been its inability to generate adequate employment.
The fast growth of the economy during the period was associated with falling
employment elasticity of production and growing unemployment. At the all-India
level, usual status employment elasticity significantly declined from 0.42 during
1983 to 1993-94 to 0.15 during 1993-94 to 1999-00 (Bhattacharya &
Sakthievel, 2004). Weekly status and Daily status employment also showed
*
This paper was presented at the national conference on Labour and Employment organised by Indira
Gandhi Institute of Development and Research, Mumbai during September 5-6, 2013 while celebrating its
silver jubilee year during 2012-2013.
**
The author would like to thank Professor C. P. Chandrasekhar for supervising the thesis on which this
paper is based
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /26

deceleration in growth. Though the employment scenario improved after 1999-

00, the pattern of growth of employment has not been satisfactory as much of
the expansion has come in the form of self-employment, reflecting an inability to
find adequately gainful paid employment (Chandrasekhar & Ghosh, 2007). It is
in this context that the present paper focuses on the performance of India’s
labour-intensive textile industry which experienced a recession1 from the mid-
1960s to the 1980s when the demand for textile products almost stagnated. A
significant increase in the per capita consumption of textiles along with a
substantial increase in exports of textiles reversed this trend after the early 1990s.
Total cloth output, which was growing at a rate of 2.71 per cent per annum
during 1975 to 1989, registered an increased rate of growth of 5.89 per cent per
annum during the period 1990-91 to 2009-102. It was expected that the growth
of output and exports of the textile industry would lead to an increase in
employment in its more labour intensive segments. However, the experience of
the economy since the 1990s suggests that there was hardly any growth in the
number of workers employed by the industry. In what follows, an attempt is
made to analyse the reasons for the unsatisfactory performance of the Indian
Textile Industry on the employment front. The argument which is stressed here
is that there have been changes in the structure of the industry and technology
use since the 1990s which have adversely affected the level of employment.
The paper is divided into four sections. Section 2 presents a profile of
employment trends in the textile industry. Section 3 critically examines the
causes and consequences of decline of employment in the mill sector.
Section 4 analyses the decline of handloom sector. This is followed by a
concluding section. The scope of the study is limited to the period since
1980-81, as the Indian textile industry has undergone major changes with
respect to demand, output and exports during this period. Further, the
analysis is based on the cotton and non-cotton (including blended) textiles
industry as these account for about 98.5 per cent of the output of the textile
industry3. The study draws heavily on the unit level data from the NSS Surveys
on Employment and Unemployment for the years 1983, 1987-88, 1993-94,
1999-2000, 2004-05 and 2009-10. Estimates of employment, based on the
usual status approach used in classification of the activity status of the persons
employed, are generated. The employment estimates provide the number of
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /27

persons employed in the textile industry according to their usual principal activity
(ps) and usual principal and subsidiary activities together (ps+ss).
Since the National Industrial Classification-1970 (NIC-1970) was used for the
38th and 43rd rounds of NSS (1983 and 1987-88 respectively), NIC-1987 was
used for the 50th round of NSS (1993-94), NIC-1998 was used for the 55th and
61st rounds of NSS (1999-00 and 2004-05 respectively) and NIC-2004 was
used for the 66th round of NSS (2009-10), the concordance from 3 digit level
of NIC-1987 to NIC-1970, from 4 digit level of NIC-1998 to 3 digit level of
NIC-1987 and from 4 digit level of NIC-2004 to NIC-1998 was used for
ensuring comparability of employment data over time. Further, since the focus
here is to compare employment figures in textiles according to use of fibre
(cotton and/or synthetic) or by process of manufacturing (spinning and/or
weaving), disaggregation of NIC-1998 and NIC-2004 at 5 digit level was also
necessary.

2. Employment in textiles production

According to the NSS data, the number of usual status employees, engaged in the
production of textiles, at the all-India level fell from the early 1980s from about
41.55 lakhs in 1983 to 31.26 lakhs by 1999-00 (Table 1). It more or less
stagnated from 1999-00 to 2004-05, but declined thereafter to 28.55 lakhs by
2009-10. The rural sector, however, registered an increase from 1983 to 1987-
88, but such employment showed a decline thereafter. The urban sector employment
fluctuated during the 1980s and 1990s4. Though it increased after the 1990s, it
remained far below the levels attained in the 1980s and the early 1990s.

3. Employment in mill sector

One of the reasons for the unsatisfactory performance of the textile industry on
the employment front is the continuous decline in employment in the mills engaged
in spinning and weaving. Although these mills form part of the organised (or the
formal) sector, they employ formal (organised) as well as informal (unorganised)
workers. These informal workers are the unprotected wage workers without any
job or social security. They consist of substitute (Badli) workers6 and casual or
contract workers who are completely flexible. The regular workers without the
social security benefits also form part of the informal workers. The boom in
demand for the textile and clothing industry since the early 1990s was expected
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /28

to lead to a tremendous increase in the production of spun yarn and to create

additional jobs in the spinning sector. The production of spun yarn increased at
a rate of about 4 per cent per annum in response to the increase in demand since
the 1990s, but it could not reverse the fall in employment in spinning.

Table 1 - Usual status employment in production of textiles (Lakhs).

Note :
For calculating employment in the textile sector for 1983 and 1987-88, following
NIC-1970, codes5 231, 233, 234, 235, 236, 247 and 260 are used. For 1993-94,
following NIC-1987, codes 231,232, 233, 234, 235, 247 and 260 are considered. For
1999-00 and 2004-05, following NIC-1998, 5 digit codes 17111, 17114, 17115,
17118 and 1730 are used. For 2009-10, following NIC-2004, 17111, 17131, 17114,
17115, 17133, 17118, 17132, 17137 and 1730 are used for calculating employment
in the textile sector.
Source: Computed from unit level data from the NSS 38th, 43rd, 50th, 55th, 61st and 66th rounds
on Employment Unemployment.

Spinning
Inter-fibre shifts
The poor performance of the spinning on the employment front during the period
needs to be analysed in the context of shifts in consumer demand away from cotton
fabric towards synthetic and blended fabrics, which turned relatively cheaper
mainly due to reductions in customs duties on the raw-materials and intermediates
required in their production during liberalisation (Oberoi, 2013). According to the
figures from the Office of Textile Commissioner, while the per capita availability of
cotton cloth remained almost stagnant, the per capita availability of synthetic and
blended cloth increased from 6.18 square metres in 1985-86 to 19.73 square
metres by 2005-06. The share of cotton fabric in overall fabric fell from above 70
per cent in the mid-1980s to between 42 and 50 per cent after 2002-03.
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /29

Although the shift, which is evident in weaving, is getting reflected in the spinning
of yarn, the spinning sector continues to depend heavily on cotton as a fibre as
its share declined from about 82-86 per cent in the first half of the 1980s to
about 70 per cent by 2003-04 and is varying around 73-74 per cent between
2005-06 and 2009-107. An analysis of data from the Textiles Committee, GOI
indicates that the more expensive cotton continued to be preferred by the richer
sections at home who could afford it8 because of the comfort associated with
the fabric, its tactile properties and its moisture and heat-transport properties. In
addition, the fast growth in the export of cotton yarn, cotton fabric, cotton
garments and made-ups, as reflected in the DGCIS data, during the period
meant that there was an externally driven derived demand for cotton yarn, which
accompanied the growth in domestic demand and resulted in continuing dominance
of cotton in spinning.

Growing filament yarn production

Overall, it resulted in a situation where the production of a proportion of total
yarn consumed in weaving started shifting from the spinning sector to the sector
producing filament yarn, which formed part of the chemical industry and grew
fast in response to an increase in their demand. The polyester filament yarn
recorded the fastest increase in its production at an average annual rate of 17 per
cent during the 1990s. The faster growth of filament yarn production compared
to spun yarn is reflected in a continuously declining ratio of spun yarn to filament
yarn production from 17.84 in 1980-81 to 2.8 by the year 2002-039.
Consequently, though the yarn production increased in the cotton mills, they were
bypassed by the significant growth in demand, which occurred for the synthetic
and blended textiles.
Modernisation
Further, de-licensing in July 1991 and withdrawal of protection for the industry
producing textile-machinery by reducing customs duties on the import of machinery
resulted in capacity expansion in and modernisation of the spinning sector in view
of the increase in overall demand. The total customs duty on machinery for
cotton and synthetic textiles (other than those imported under export obligation)
was reduced from 90 per cent ad valorem in 1988-90 to 37.86 per cent by
1997-9810. According to ASI data, real gross fixed investment in cotton mills at
1980-81 prices, which fluctuated between Rupees 70 – 260 Crores during most
of the 1980s, registered substantial growth after the middle of the 1980s and
reached very high levels of Rupees 570 – 1290 Crores during 1992-93 to
1997-9811. Studies indicate that the increased investment and modernisation in
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /30

spinning since the 1990s led to improvement in productivity in the spinning sector.
The productivity of spindles, which increased at a low rate of 0.09 per cent per
annum from 1983 to 1990, improved at an annual rate of 2.85 per cent between
1990 and 1996 (Bedi, 2003). Similarly, results of a year wise comparison of
major productivity parameters carried out by SITRA (2003) indicate that
between 1990 and 2000, the labour productivity in spinning has shown an
impressive increase of about 42 per cent. The increase in labour productivity in
modernised textile mills reduced the requirement of workers for performing the
same tasks in the mills as all purely manual work became redundant (Chakravarty,
2002). Several case studies suggest that there was a significant fall in the need
for the usual skills required for handling usual operations, which were routine,
repetitive and monotonous. Technological modernisation led to a significant
amount of retrenchment of workers in the organised textile mills (Dutta, 1996).
Even formal employment was affected as a number of vacancies, created after
the retirement of the workers, were not filled during the first phase of technological
modernisation around the mid-1980s. Later, a voluntary retirement scheme was
offered to the workers who became redundant in the course of computerisation
and automation. This resulted in a substantial fall in employment in the mills.
Closure
Overall, the spinning sector was doing well on the output front. The production
of spun yarn increased as the new units were set up at an unprecedented pace
and the existing mills were also expanding rapidly. According to the figures from
the Textile Commissioner’s Office, the number of spinning mills increased from
777 in 1990-91 to 1564 by 1997-98. However, despite the expansion in
demand, the industry was characterised by excess capacity because of
“overexpansion”. This seems to have affected the inducement to invest and
modernise of some of the mills in the industry. While the productivity of the
spinning sector as a whole increased substantially, there was variation in the levels
of modernisation and technological competence within the mill sector, which had
widened during the period of high investments (Shanmugnanandam and
Sreenivasan, 2008). The higher level of modernisation increased not only the
level of labour and machine productivity of mills; it also affected their sales
turnover and profits. Under these circumstances, the mills which chose not to
modernise or invest less in modernisation, could not compete with the stronger
and fast expanding mills, which had modernised and enjoyed economies of scale.
For example, several spinning mills operating under co-operative sector, like
Akot Taluka Sahakari Soot Girni Ltd. and Jawahar Shetkari Sahkari Roto Soot
Girni Ltd., which did not allocate funds for modernisation of plant and machinery
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /31

and technological upgradation could not face increased competition. Many of

these units had started accumulating losses because of recession in demand
during the 1970s and 1980s, which increased substantially during the 1990s.
They found it difficult to sustain the pressure and compete with the modern mills
and were ultimately forced to close down. According to the figures from the
Textile Commissioner’s Office, the number of closed spinning mills increased
from 46 in December 1984 to 77 in December 1994, but it then increased to
378 by May 2004. The closure of the mills led to a further decline in the number
of workers in spinning.
Estimates based on NSS Surveys
The decline in employment in spinning is reflected in the employment data
collected by the NSS through its Employment Unemployment Surveys (Tables
2). The data indicate that the usual status employment in the spinning declined
after 1993-94 at the all-India level. In the rural areas it fluctuated around 3.5
lakhs up to 2004-05 but declined to 2.4 lakhs in 2009-10. The urban areas
recorded a substantial fall in employment from 5.53 lakhs in 1993-94 to 3.09
lakhs in 2004-05, which later increased to 3.79 lakhs in 2009-10. The data also
points to a continuing dominance of cotton in spinning in spite of a substantial
increase in the demand for synthetic and blended textiles since the 1990s.
Composite mills
In addition to fall in employment in the spinning mills, employment has also
declined in the composite mills during the period. According to the figures from
the Office of Textile Commissioner, though the production of fabrics increased
substantially since the 1990s, the fabric produced in the mill sector continued to
experience negative growth. The share of the mill sector declined further from
about 11 per cent of the total fabric in the early 1990s to about 3.5 per cent by
2004-05 and fluctuated around this level up to 2009-10. The weaving capacity
of the mills, which had been stagnant for a number of years, started declining
after the middle of the 1980s. The number of installed looms, which varied
between 200-210 thousands till the mid-1980s, declined at the rate of -5.8 per
cent per annum from 1988-89 to 2009-1012. The figures indicate that the number
of closed composite mills, which stood at 59 in March 1993, increased to 106
by March 1999 and rose further to 134 by March 2003. Approximately110 of
the mills were closed for a period of more than five years.
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /32

Table 2 - Usual status employment in spinning (Lakhs)

Table 2 - Usual status employment in spinning (Lakhs)
1993-94 1999-00 2004-05 2009-10
All-India PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total yarn 7.49 8.86 7.23 7.57 5.36 6.53 5.47 5.74
Cotton yarn 5.62 6.97 5.88 6.18 4.72 5.36 5.00 5.66
Manmade yarn 1.87 1.89 1.35 1.4 0.64 1.17 0.07 0.08
Rural PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total yarn 2.47 3.33 3.38 3.63 2.85 3.44 2.07 2.39
Cotton yarn 1.9 2.75 3.05 3.28 2.7 3.18 2.04 2.35
Manmade yarn 0.57 0.58 0.33 0.36 0.15 0.26 0.03 0.04
Urban PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total yarn 5.02 5.53 3.85 3.94 2.51 3.09 3.00 3.35
Cotton yarn 3.72 4.22 2.83 2.9 2.02 2.18 2.96 3.31
Manmade yarn 1.3 1.31 1.02 1.04 0.49 0.91 0.04 0.04

Note:
The employment estimates in cotton spinning for 1993-94 are based on NIC codes 231
and 235 (based on NIC-1987). Skill codes are observed for the persons employed in
code 235 during 1993-94. Total employment minus the weavers (skill code 05) in cotton
mills are considered to be engaged in cotton spinning. Similarly estimates are generated
for employment in the spinning of manmade yarn for the year 1993-94 using NIC code
247. For 1999-00 and 2004-05, following NIC-1998, 5 digit codes 17111 and 17114 are
used for spinning of cotton yarn and manmade yarn respectively. For 2009-10, following
NIC-2004, 5 digit codes 17111 and 17131 are used for spinning of cotton yarn.
Codes17114 is used for spinning of manmade yarn.
Source: Computed from unit level data from NSS 50th, 55th, 61st and 66th rounds on
Employment Unemployment.

Inter-sectoral shifts
This was mainly because of the inter-sectoral shifts during the period, which
resulted in declining competitiveness of the composite mills vis-a-vis the
powerlooms units in the decentralised sector. The powerlooms, which continued
to operate in the unregistered sector either as own account enterprises or as non-
directory or directory establishments, had several cost advantages due to
organisational differences between mills and powerlooms. The powerloom units
consist of mainly two types: the owner-proprietary type (weaver working on his
own) and the master weaver type. In the first, the weaver purchases yarn,
manufactures fabrics and sells them. He owns less than 12 looms and undertakes
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /33

weaving as a means of livelihood. In the master weaver type of activity, a weaver

carries out the manufacturing task but receives only the conversion cost. The
master weaver supplies the yarn to the weaver, gets it woven by him and sells
fabrics in the market. The master weaver owns about 12 or more looms and may
not even manage the business himself. He may appoint a middleman for this
purpose. This relationship gives him the benefit of paying lower wages and
obtaining yarn cheaply in bulk, adjusting the pattern of production and better
marketing13. Therefore an exclusive group of producers of manmade fibres has
emerged that is linked with powerlooms through a management and production
system14.The organisational differences between mills and powerlooms have
meant continuing cost advantages to the powerlooms. The wage cost per metre
was lower in powerlooms by about 50 to 70 per cent (ATIRA, 1985). Further,
the substantial growth in the demand for the products of textile and clothing,
especially for synthetics, which are entirely produced by the powerlooms, has
speeded up the growth of powerlooms. Increasing use of machinery in the
powerlooms has resulted in technology improvement. The powerloom units have
established themselves in the international market as well. With a much higher
growth rate (12 per cent per annum from 1993-94 to 1999-00) of fabric
exported than that of the mill sector (9.17 per cent per annum during the same
period)15, powerlooms have become the leading suppliers of fabric in the world
market.
Evidence from ASI: GVA, Employment and Wages
Thus, overall, the inter-fibre and inter-sectoral shifts did not prove favourable for
the mill sector and resulted in a significant shift of production of yarn and cloth
away from the mill sector. The increased productivity of workers and the fall in
the number of workers employed in the mills is reflected in the data from ASI.
The data shows an increasing trend in the real GVA per worker (with base 1993-
94) in the mills engaged in the manufacturing cotton textiles since the mid-1980s
(Table 3). The real GVA per worker which varied in the range of Rupees 38,000
to Rupees 46,000 in the first half of the 1980s, increased to around Rupees
80,000 after the mid-1990s.The trend seems to have continued since the late
1990s. The real GVA per worker in the manufacturing of all types of textiles
(using all types of fibres) in the factory sector increased from Rupees 1.14 lakhs
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /34

in 1998-99 to more than 1.3 lakh by 2002-03, which further increased to more
than 2.6 lakhs by 2010-11 (Table 4). The increase in the real GVA was
accompanied by decline in the number of workers employed. According to ASI
data, the number of workers employed in the mills engaged in the manufacturing
of cotton textiles declined from above 7 lakhs in the early 1980s to about 5 lakhs
after the mid-1990s. The total number of mandays employed annually fell from
above 21 crores in the first half of the 1980s to less than 18 crores after 1990-
91. The trend of decline in employment seems to have continued since the late
1990s. The data available indicate that the number of workers employed in the
manufacturing of all kinds of textiles in the factory sector fell from 8.94 lakhs in
1998-99 to 6.96 lakhs by 2003-04. The number of mandays (workers)
employed fell from 29.2 crores in 1998-99 to 23.13 crores by 2003-04. The
numbers show an increase thereafter; however, the number of workers employed
remained lower than what they were during the late 1990s.
In addition to this, though the wage per worker (and the wage per man-day) in
money terms increased during this period, the real wage rate, which increased in
the late 1980s, did not show any further increase in the mills engaged in the
manufacturing of cotton textiles (Table 3). They remained almost the same in the
first half of the 1990s and declined later in 1996-97 and 1997-98. A similar
tendency was observed from 1998-99 to 2009-10 in the factory sector engaged
in the manufactureing of all kinds of textiles (Table 4). Apart from remaining
almost stable, the real wages lagged far behind labour productivity, which
increased fast due to substantial modernisation in the sector. As a result, the share
of wages in the gross value added (at current prices), which was high (0.47 to
0.59) upto the mid 1980s in the mills engaged in the manufacturing of cotton
textiles, declined after the late 1980s (0.32 to 0.47). The share of wages in GVA
at current prices declined in the factory sector engaged in the manufacturing of
all kinds of textiles from 0.29 in 1998-99 to 0.17 by 2010-11. In real terms, the
fall was from between 0.55 and 0.68 in the first half of the 1980s to between
0.40 and 0.53 by the first half of the 1990s and further to only 0.35 in 1997-
98. In the manufacturing of all kinds of textiles, the share of real wages in real
GVA declined from 0.21 in 1998-99 to 0.09 by 2010-11. Thus, the changes in
the structure of the industry and technology use had serious implications for the
level of employment and the share of wages in the mill sector.
Table 3 -Employment, wages and GVA in cotton mills – 1980-81 to 1997-98
Table 3 -Employment, wages and GVA in cotton mills 1980-81 to 1997-98
Year Number Number Wages Wages Real Real Real GVA Wages/G Real
of of per per Wages Wages per worker VA at wag
workers mandays worker manday per per (Rs current es/re
-workers (Rs) (Rs) manday worker Thousands) prices al
(Thousa at 1993- (Rs GV
nds) 94 Thousan A
prices d)
(Rs)

1980-81 732846 234929 8576 26.75 84.87 27.2 46.04 0.47 0.59
1981-82 675118 211013 9164 29.32 82.67 25.83 41.84 0.51 0.62
1982-83 706592 226473 9769 30.48 79.77 25.57 38.00 0.58 0.67
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /35

1983-84 739192 250334 11274 33.29 77.42 26.22 45.04 0.54 0.58
1984-85 670828 225798 12540 37.26 81.44 27.41 43.71 0.59 0.63
1985-86 592559 201023 13729 40.47 83.03 28.17 51.07 0.54 0.55
1986-87 601869 206732 15390 44.81 84.55 29.04 57.77 0.54 0.5
1987-88 532255 182515 16691 48.67 84.14 28.85 54.94 0.56 0.53
1988-89 508909 172137 18308 54.13 85.85 29.04 40.13 0.53 0.72
1989-90 549025 189399 20233 58.66 87.48 30.17 70.53 0.42 0.43
1990-91 545802 190130 22711 65.2 87.19 30.37 76.77 0.4 0.40
1991-92 519872 176577 24981 73.55 86.63 29.44 64.18 0.46 0.46
1992-93 509199 172505 28339 83.65 89.95 30.47 65.63 0.47 0.46
1993-94 512636 175233 29101 85.13 85.13 29.1 65.53 0.44 0.44
1994-95 496435 171154 32435 94.08 85.45 29.46 73.98 0.33 0.40
1995-96 529562 187306 37177 105.1 86.65 30.65 57.47 0.45 0.53
1996-97 507197 176074 37723 108.7 81.95 28.45 85.82 0.32 0.33
1997-98 495750 NA 39932 _ _ 28.18 79.88 0.35 0.35

Note: 3 digit code 235 based on NIC-1987 is considered. The CPIN for industrial workers with base 1993-94 is used for deflating wages.
The WPI of cotton textile with base 1993-94 is used for deflating GVA.
Sources: Computed based on figures from EPW Research Foundation, Annual Survey of Industries, 1973-74 to 1997-98: A Data Base on
the Industrial Sector in India, 2002; GOI, Ministry of Labour and Employment and Office of Economic Advisor, GOI for CPIN and
WPI respectively.
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /36

Table 4 - Real wage rate and the share of wages in GVA in factory sector
Year Num ber Num ber W ages Wages Rea l Rea l Real Wages Real
of of per per Wages Wag es per G VA p er /GVA w ages/
workers manda ys worker m anda y per ma nda y at w ork er Real
-wo rkers (Rs) (Rs) worker 93-94 (Rs) GVA
(in '0 00) (Rs) prices
1998 -99 893 63 4 291 67 4 37 69 1 115.4 8 2 35 12 .96 7 2.0 4 11 4561 .69 0 .29 0.2 1
1999 -00 829 88 3 275 52 4 40 79 6 122.8 8 2 46 05 .33 7 4.1 1 11 7272 .79 0.3 0.2 1
2000 -01 810 29 0 269 87 6 43 85 1 131.6 6 2 54 81 .11 7 6.5 1 12 9296 .27 0 .28 0.2 0
2001 -02 762 03 5 254 82 3 44 31 4 132.5 2 2 46 93 .32 7 3.8 4 12 2903 .47 0 .30 0.2 0
2002 -03 732 71 2 245 42 8 46 41 1 138.5 6 2 48 42 .48 7 4.1 7 13 8999 .67 0 .27 0.1 8
2003 -04 696 35 3 231 34 9 46 08 1 1 38 .7 2 37 77 .62 7 1.5 7 13 2168 .84 0 .26 0.1 8
2004 -05 696 55 6 267 90 1 47 39 2 123.2 2 2 35 13 .81 6 1.1 4 13 7296 .39 0 .25 0.1 7
2005 -06 735 33 4 281 72 0 48 97 9 127.8 4 2 34 00 .87 6 1.0 8 16 3440 .07 0 .22 0.1 4
2006 -07 766 67 7 288 90 6 47 58 9 126.2 9 2 14 36 .32 5 6.8 9 17 8892 .83 0 .19 0.1 2
2007 -08 770 43 6 295 10 0 53 19 1 138.8 7 2 25 18 .73 5 8.7 9 17 8237 .92 0 .22 0.1 3
2008 -09 726 63 2 282 24 4 54 72 2 140.3 8 21 25 0 5 4.7 1 1 69 18 0 0 .23 0.1 3
2009 -10 748 08 8 284 69 5 60 47 6 158.9 1 20 92 0 5 4.9 8 2 25 02 0 0 .19 .0 9
2010 -11 811 21 2 312 24 8 72 29 9 187.8 3 22 65 0 5 8.8 4 2 60 33 0 0 .17 .0 9
Notes: 4 digit Code 1711 based on NIC-1998 is considered for 1998-99 to 2003-04. 4 digit Code 1711 and 1713, based on NIC-2004 are
considered for the later years. The CPIN for industrial workers with base 1993-94 is used for deflating wages. The WPI of textile with
base 1993-94 is used for deflating GVA.
Source: Computed based on figures from CSO, Annual Survey of Industries; GOI, Ministry of Labour and Employment and Office of
Economic Advisor, GOI for CPIN and WPI respectively.
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /37

4. Decline of handlooms
The inter-fibre and inter-sectoral shifts during the period have posed a serious
threat not only to the composite mills but also to handlooms which had been the
main source of employment within the textile industry. There is evidence that points
to remarkable increase in handloom production up to the late 1980s even when
home demand for textiles was declining. But, contrary to what is suggested by the
official estimates16, they suffered a setback after the 1980s. According to an
analysis of figures in the NSS Surveys on Unorganised Manufacturing, the real
GVA in the weaving of cotton cloth in the handlooms at the all-India level was
increasing during 1978-79 to 1989-90, but registered a decline thereafter. The real
GVA in handlooms in the urban areas started falling during the 1980s, but it
continued to increase in the rural areas. The real GVA declined substantially in the
rural areas during 1989-90 to 1994-95 (Table 5). Though there was some
improvement in the real GVA generated in urban handlooms, the real GVA at the
all-India level in 1994-95 was much lower than that in 1989-90.

Table 5 - Real GVA with base 1993-94 in weaving of cotton cloth

(Rupees Crore)17

Handlooms Powerlooms
Year Rural Urban All India Rural Urban All India
1978-79 335.79 206.59 542.38 31.88 139.87 171.75
1989-90 591.50 163.88 755.38 118.78 323.38 442.16
1994-95 373.82 182.35 556.17 202.18 360.73 562.91
2005-06 203.50 207.49 410.09 188.83 264.28 453.11

Notes: For calculating real GVA in handlooms and powerlooms for 1978-79, following NIC-
1970, codes 235 and 236 are used respectively. For 1989-90 and 1994-95, following
NIC-1987, codes 233 and 234 are used respectively. For 2005-06, following NIC-2004,
code 17133 is used for handlooms. Code 17115 for weaving (excluding handloom
and khadi) is used for powerlooms (as weaving in unorganised sector includes
khadi, handlooms and powerlooms). The WPI of cotton textiles with base 1993-
94 is used to deflate GVA in weaving of cotton textiles in handlooms as well as in
powerlooms.
Sources: Computed based on figures from NSSO (1978-79, 1989-90, 1994-95); CSO
(1978-79, 1989-90); Office of Economic Advisor, GOI for WPI and NSSO, unit level data
on Unorganised Manufacturing Sector in India, 2005-06.
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /38

The trend of decline of handlooms since the late 1980s seems to have continued
during the 1990s especially in the absence of any evidence of increase in demand
for the products of handloom sector from Textiles Committee, GOI, which collects
data on home demand or from the Apparel Export Promotion Council, which
records the export of all kinds of garments. The figures on the export of cotton
fabric from handloom sector do not show any improvement during this period
either18. Several studies have pointed to similar results. A comparison of the figures
yielded by the Censuses of handlooms conducted in 1987-88 and the Joint Census
of handlooms and powerlooms, 1995-96 confirms the view that handloom-weaving
was declining during the period. A comparison of the results from the Census of
handlooms 2009-10 indicates a further decline of handloom weaving at the all-
India level. In the light of all this evidence, it appears that the official figures which
point to a creditable performance of the handloom sector during the 1990s are not
reliable as they suffer from various lacunae (Misra, 1993).
Dis-advantage of handlooms
Various attempts to explain the dis-advantages of handlooms vis-à-vis other sectors
since the 1970s highlight the low productivity of the sector, which is one third of that
of powerlooms. (SITRA, 1982). Though production in the powerloom sector has
increased substantially every year since the 1950s, the real GVA in cotton weaving
in the handlooms remained more than 3 times that in the powerlooms till the late
1970s (Table 5). After the late 1980s it declined substantially. By 1994-95, it was
slightly lower than that in powerlooms. Later when the demand increased, but there
was a shift to synthetic textiles, an analysis of unit level data from the NSS 62nd
round on Unorganised Manufacturing reveals that the real GVA declined in the
production of cotton cloth in both the sectors. By 2005-06 the real GVA in
powerlooms was far higher than that in handlooms (Table 5).
Problems multiplying since the 1990s
Further, the problems faced by the handlooms have multiplied since the 1990s.
There is a massive increase in consumer demand for synthetics and blended textiles,
but they are almost entirely produced by the powerloom. In this scenario the nature
of competition that handlooms face from the powerlooms, requires a comparison
of their real GVA in the weaving of cotton combined with synthetic cloth. The
comparison points to a clear decline of handlooms, which continued to be dominated
by the production of cotton cloth (Table 6). Powerlooms diversified significantly
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /39

responding to the shift in demand towards synthetic textiles. Only one-fifth of the
total real GVA of powerlooms was generated in the production of cotton cloth
during 2005-06.

Table 6 - Real gross value added with base 1993-94 in weaving of cloth
(Rupee Crores), 2005-06
2005-06
Handlooms Powerlooms
Rural Urban All India Rural Urban All India
Cotton 203.50 207.49 410.99 188.83 264.28 453.11
Cotton and synthetic 226.46 216.77 443.23 226.62 1422.42 1649.04

Notes: Following NIC-2004, codes 17133 and 17137 are used for cotton textiles and synthetic
textile fabrics respectively for handlooms. Codes 17115 and 17118 for weaving
(excluding handloom and khadi) are used for cotton textiles and synthetic textile
fabrics respectively in powerlooms (as weaving in unorganised sector includes khadi,
handlooms and powerlooms). The WPI of cotton textiles with base 1993-94 is used to
deflate GVA in weaving of cotton textiles in handlooms and in powerlooms. The WPI
of manmade textiles is used to deflate GVA in weaving of synthetic textiles in handlooms
and in powerlooms.
Source: Computed based on figures from NSSO, unit level data on Unorganised
Manufacturing Sector in India, 2005-06.; Office of Economic Advisor, GOI for WPIs.

In addition to this, handlooms, engaged mainly in weaving of cotton cloth,

suffered since the 1990s because of changing consumer demand towards knitted
textiles. According to Market Research Wing, Textiles Committee, GOI, the per
capita purchase of hosiery cotton textiles at the all-India level increased from
0.69 metres in 1983 to 0.73 metres in 1990 and to 1.32 metres by 2000, which
further increased to 1.82 metres by 2006. In addition to this, there was a
substantial growth in external demand for the products of hosiery sector after the
mid-1980s. According to the DGCIS data, the export of knitted and crocheted
fabric grew fast from the late 1980s to roughly the middle of the 1990s, after
which it registered a decline. However, the export of knitted and crocheted
garments continued to grow since the middle of the 1980s. The shift towards
knitted products was mainly driven by the inherent qualities of the knitted textiles
over the woven textiles, which include softness, coolness, easy maintenance,
sweat absorbency and durability. These inherent qualities led to a remarkable
increase in the overall demand for the products of the hosiery sector resulting in
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /40

a continuous increase in production of the hosiery sector since the 1990s. This led
to increase in employment in the hosiery sector. According to the NSS data, the
usual status employment in the hosiery sector at the all-India level increased from
about 1.3 lakhs in 1983 to 2.98 lakhs in 1993-94 which further grew to 4.17 lakhs
by 2004-05. However, the employment declined sharply in 2009-10 to 2.7
lakhs19. An analysis of DGCIS figures suggests that this decline may be attributed
to fall in exports of knitted and crocheted garments to the developed economies
when they lowered demand after the financial crisis in September, 2008. The value
of exports of India’s knitted and crocheted garments of cotton (with base year
1990-91) which increased from Rupees 754.82 crores in 1990-91 to Rupees
4986.42 crores by 2008-09, declined to Rupees 4551.31 crores in 2009-1020.

On the supply side, the lack of diversification of handlooms to manmade fibres

meant that they continued to depend on spun yarn for their principal input, which
became more costly as cotton became more expensive. The handlooms also faced
problems of availability of yarn as there has been a substantial increase in the export
of all kind of textile products of cotton since the early 1990s. This seems to have
impacted the domestic availability of hank yarn to the handloom weavers. Further,
the state policy towards the handlooms changed since the 1990s. The state support
to the sector was gradually reduced (NCEUS, 2007). The tax concessions
enjoyed by handlooms sector were also withdrawn. The number of items reserved
for the sector was also curtailed and special scheme for the production and
procurement of cheaper cloth under Janata Cloth Scheme was dissolved in 1996.

Employment estimates
The analysis of data from the NSS rounds on Employment – Unemployment
indicates changes in the employment scenario in the powerloom, handloom and
cotton mill sectors from the early 1980s to the early 1990s (Table 7). This data
combined with the results from the NSS Surveys on Unorganised Manufacturing
indicate that the employment trends in the handloom sector mirror those in the
real GVA generated in the sector. Though handlooms remained the major source
of employment, the employment in urban handlooms started falling after the early
1980s. It continued to increase in rural handlooms. At the all-India level, the
employment declined in handlooms after 1987-88 when the real GVA in rural
handlooms recorded a downward trend.
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /41

Table 7 - Usual status employment in cotton mills, handlooms and

powerlooms (Lakhs)

1983 1987-88 1993-94

All-India PS PS+SS PS PS+SS PS PS+SS
Cotton mills 11.87 12.79 9.36 10.01 5.26 5.48
Handlooms 15.44 17.54 16.48 19.14 13.57 16.44
Powerlooms 3.95 4.08 5.99 6.14 7.08 7.4
Urban PS PS+SS PS PS+SS PS PS+SS
Cotton mills 8.41 8.72 5.64 5.71 3.36 3.45
Handlooms 6.44 7.03 5.72 6.31 5.49 6.22
Powerlooms 2.75 2.83 2.7 2.8 4.57 4.69
Rural PS PS+SS PS PS+SS PS PS+SS
Cotton mills 3.46 4.07 3.73 4.3 1.89 2.03
Handlooms 9 10.51 10.77 12.83 8.07 10.22
Powerlooms 1.2 1.25 3.29 3.34 2.51 2.71

Notes: For calculating employment estimates in the cotton mills, handlooms and powerlooms
for 1983 and 1987-88, following NIC-1970, code 231, 235 and 236 are used. For 1993-94, following
NIC-1987, codes 235, 233 and 234 are used respectively.
Source: Computed from unit level data from NSS 38th, 43rd and 50th rounds on Employment
Unemployment Surveys.

Overall, the decline of the composite mills and the handlooms resulted in a
substantial fall in the number of persons engaged in weaving. An analysis based
on the unit level data from the NSS Employment – Unemployment surveys,
shows the employment scenario in weaving from 1993-94 to 2009-10. About
28.95 lakh persons were employed in woven cloth production in the usual status
at the all-India level in 1993-94. The numbers fell after 1993-94. Clearly, the fall
in the number of persons engaged in weaving in the composite mills and the
handlooms since the 1990s was much greater than the increase in employment
in the powerloom sector. Similar trends are observed in the rural areas though
the urban areas recorded some increase in the number of persons engaged in
weaving after the 1990s. Subsidiary employment continued to fall since 1993-94.
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /42

Table 8 - Usual status employment in weaving of cloth (Lakhs)

1993-94 1999-00 2004-05 2009-10

All-India PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total cloth 25.3 28.95 20.2 21.75 20.1 21.45 18.69 19.74
Cotton cloth 22.6 26.2 18.9 20.32 17.6 18.76 14.55 15.50
Manmade cloth 2.69 2.75 1.25 1.45 2.58 2.68 4.5 4.61
Rural PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total cloth 13.3 16.06 11.5 12.8 10.1 11.16 7.33 8.11
Cotton cloth 11.9 14.53 11 12.15 9.71 10.68 7.22 7.90
Manmade cloth 1.47 1.53 0.51 0.67 0.41 0.47 0.46 0.57
Urban PS PS+SS PS PS+SS PS PS+SS PS PS+SS
Total cloth 12 12.89 8.62 8.95 10 10.29 11.36 11.63
Cotton cloth 10.8 11.67 7.88 8.17 7.84 8.08 7.33 7.60
Manmade cloth 1.22 1.22 0.74 0.78 2.17 2.22 4.04 4.04

Notes: The employment estimates in cotton cloth production are obtained for 1993 using
codes 232, 233, 234, 235 and 247 following NIC-1987. Skill codes are observed for the
employed persons in code 235 in 1993-94.The weavers (skill code 05) in cotton mills
are considered to be engaged in cotton cloth production. Similarly, estimates are
generated for employment in the production of manmade cloth in 1993-94 using NIC
code 247. For 1999-00 and 2004-05, the estimates are based on NIC- 1998. 5 digit
code 17115 is used for cotton cloth and 5 digit code 17118 is considered for manmade
cloth. For 2009-10, the estimates are based on codes 17115, 17132 and 17133 for
cotton cloth. Code 17118 and 17137 are used for manmade cloth.
Source: Computed from unit level data from NSS 50th, 55th, 61st and 66th rounds on
Employment Unemployment.

Clearly, modernisation of the spinning sector and the decline of composite mills
and handlooms led to a fall in the number of persons employed in the textile
industry. Though employment increased in the hosiery sector, the fall in employment
in the weaving was much sharper. Overall, there was a decline in the number of
employees in the textile industry.

Conclusion
Clearly, a boom in the ostensibly labour-intensive textile industry in terms of
demand, production, investment and exports in the post-liberalisation period did
not lead to the expected growth of employment. Instead employment declined in
both the spinning and the weaving sectors. Technological progress and
modernisation in the spinning sector led to an increase in productivity, which
adversely affected employment. The decline of handlooms, which used to
account for a significant share of employment in textile industry, led to the fall of
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /43

employment in the weaving sector. The decline of the composite mills also
adversely affected employment in the weaving sector. Overall, the structural
changes and the changes in the technology use in the industry during the post-
liberalisation period constrained the accompanying growth of employment in the
textile industry.

Appendix

NIC Code Details of NIC-codes used

Cotton spinning, weaving, shrinking, sanforising, mercerizing and finishing of cotton
NIC-1970 231
textiles in mills
233 Cotton spinning other than in mills (charkha)
234 Weaving and finishing of cotton khadi
235 Weaving and finishing of cotton textiles on handlooms
236 Weaving and finishing of cotton textiles on powerlooms
247 Spinning, weaving and finishing of other textiles synthetic fibres, rayons, nylons etc.
260 Manufacture of knitted and crocheted textile products
NIC-1987 231 Cotton spinning other than in mills (charkha)
232 Weaving and finishing of cotton khadi
233 Weaving and finishing of cotton textiles on handlooms
234 Weaving and finishing of cotton textiles on powerlooms
235 Spinning, weaving and processing in mills
247 Spinning, weaving and processing of manmade textile fibres
260 Manufacture of knitted and crocheted textile products
NIC-1998 17111 Preparation and spinning of cotton fibre including blended cotton
17114 Preparation and spinning of manmade fibre including blended fibre
17115 Weaving and manufacture of cotton and cotton mixture fabric
17118 Weaving and manufacture of manmade fibre and manmade mixture fabric
1711 Preparation and spinning of textile fibre including weaving of textiles
1730 Manufacture of knitted and crocheted fabrics and articles
Preparation and spinning of cotton fibre including blended cotton (excluding
NIC-2004 17111
khadi/handloom)
Preparation and spinning of manmade fibre including blended fibre (excluding
17114
khadi/handloom)
17115 Weaving, manufacture of cotton and cotton mixture fabrics (excluding khadi/handloom)
Weaving, manufacture of manmade fibre and manmade mixture fabric (excluding
17118
khadi/handloom)
17131 Cotton spinning through charkha
17133 Weaving of cotton textiles on handlooms
17137 Weaving of artificial/synthetic textile fabrics on handlooms
Preparation and spinning of textile fibre including weaving of textiles (excluding khadi
1711
/handlooms)
Preparation and spinning of textile fibre including weaving of textiles ( khadi
1713
/handlooms)
1730 Manufacture of knitted and crocheted fabrics and articles
 Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /44

Notes
1 Refer Chandrasekhar (1984), Goswami (1990).
2 Average annual compound rates of growth computed based on figures from the
Textile Commissioner’s Office published in Handbook of Statistics on Textile Industry,
CITI, 30th edition and Annual Report, CITI, 2010-11.
3 The figures include manufacture of knitted and crocheted textile products of other
fibres (mainly woolen) as well for all the years, as given the NIC, fibre-wise estimates
cannot be obtained for the period prior to 1999-00.
4 The discussion is based on usual status employment (PS+SS) unless mentioned
otherwise.
5 Details of NIC-codes are given in Appendix.
6 After the 1982 textile strike in Bombay permanent labourers were replaced by casual
labourers.
7 Source: CITI, Handbook of Statistics on Textile Industry, 30th edition and Annual
Reports for the recent years.
8 They continued to spend about 21 per cent of their real monthly per capita purchase
of textiles on cotton textiles and clothing.
9 Computed based on figures from Office of Textile Commissioner, published in
Handbook of Statistics on Textile Industry, CITI, various editions.
10 This was later increased to 53.82 per cent by 2000-01. Source: CITI, Annual Reports.
11 Investments in t th year are calculated as difference in the stocks of gross fixed
capital in tth year and t-1th year. The WPI for textile machinery for spinning &
weaving is used as deflator.
12 Source: Average annual compound rate of growth computed based on figures from
Confederation of Indian Textile Industry, Handbook of Statistics on Textile Industry,
30th edition and Annual Reports for recent years.
13 Bombay Textile Research Association (n.d. cited in Uchikawa,1998, p104)
14 Patel (1990 cited in Uchikawa,1998, p104)
15 Calculated based on figures from the Office of Textile Commissioner, Compendium of
Textile Statistics, various years.
16 The data from the Textile Commissioner’s Office indicates that the handloom sector
continued to perform remarkably well from 1990-91 to 1997-98 recording 8.5 per cent
annual growth rate. Though the share declined in the following years, but it is
reported that the production continued to remain high upto 2001-02. The data indicate
substantial reduction in production thereafter.
17 Concordance Tables between NIC-1970 and NIC-1987, NIC-1987 and NIC-1998 and
NIC-1998 and NIC- 2004 are used for computing the figures.
18 Source : CITI, Handbook of Statistics on Textile Industry, various editions
19 Notes: Code 260 is used for NSS rounds conducted in 1983 respectively, following
NIC-1970. For 1993-94, following NIC-1987, code 260 is used. For 2004-05 following
NIC-1998, 4 digit codes 1730 is used. For 2009-10, following NIC-2004, 4 digit codes
1730 is used for calculating employment in the hosiery sector.
Bindu Oberoi /Arthaniti 11 (1-2) / 2012 /45

20 Figures are based on exports of knitted and crocheted garments of cotton and
manmade fibres for which Codes 845 and 846 are used respectively for the period
1980-81 to 1986-87. Code 61 provide the required data for the later period. Unit value
is calculated for each garment for all the years by dividing the value of export by the
quantity exported in that year. A unit value index is constructed with base 1990-91
for each garment for all the years. Using these indices, current values of each garment
exported in each year are converted into values with base 1990-91. The values of
exports of all garments at base year prices in a year are then added to obtain the value
of garments exported at base year prices in that year. The exports of small garments
of gloves, baby garments, stocking, brassier, ties, other garments, pantyhose are not
included as they are reported in kgs for some years and in numbers for the others.
Dressing gowns and ski suits are also not considered for the same reason.

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