Creating jobs through garment exports
Mains Paper 2: Economy
Prelims level: Employment
Mains level: Boosting employment through garment exports
- Rapid creation of productive and better paying jobs reduces poverty. It
also mitigates inequality.
- One can actually have high GDP growth rates with modest employment
- One can also have higher expenditure on anti-poverty and welfare
measures, without having a major impact on jobs.
Job creation is the key goal
- Job creation should, therefore, be the key development goal. States,
instead of signing MoUs for thousands of crores of investment, should be
seeking job creation commitments in their Investment Summits.
- Seeing the economy through the prism of job creation would bring into
focus labour intensive sectors and generate discussion around policy
instruments which could be used to get these sectors to grow more rapidly.
- This would require fresh thinking beyond the traditional macroeconomic
parameters such as inflation, the fiscal and current account deficits, and
interest rates on the one hand, and, on the other, infrastructure
development; power, highways, ports and airports.
- India fought hard in the WTO negotiations for the phasing out of the
quota system which used to govern textile exports and where (presumably for
geopolitical reasons) the Chinese had a quota which was many times that of
- It was felt that once quota restrictions ended, apparel exports from
India would rise rapidly and catch up with Chinese exports.
Challenges for India
- After the quota regime ended in 2005, textile and garment exports from
India did not rise more rapidly.
- China’s per capita income and wages are now about five times that of
India’s. Yet its textile exports are over $270 billion whereas India’s are
around $40 billion.
- India’s growth rates remain modest whereas Vietnam and Bangladesh have
been having sustained export growth of over 20 per cent per annum.
- Fresh thinking on feasible measures to achieve a breakthrough is
- Garment exports, given India’s low wages, should be covering the whole
range of products for the global market rather than being restricted
primarily to cotton apparel as is the case now.
- Given the nature of the global supply chain of readymade garments with
rapidly changing designs and fashions, hassle-free zero duty imports of
synthetic fabrics specified by designers of global brands is an essential
prerequisite for becoming part of global supply chains.
- This is not the case now.
- The mechanism of advance licensing on input-output norms for exports
works for standard industrial products, but not for garments.
- One radical option would be to do away with the duty protection
available to the domestic synthetic fibre and fabric industry.
What it needs to?
- However, a viable approach which does not hurt the upstream domestic
industry would be a dispensation where garment exporters exporting more than
₹100 crore per annum are given the freedom to import fabrics duty free,
maintain records of usage for exports and be subject to annual audit to
ensure that there is no misuse.
- Bangladesh runs such a scheme. India could easily do so.
- This would enable garment exporters across the country to attempt
diversification using imported fabric and accessories.
- A more ambitious approach would be for the government to develop large
integrated textile and apparel Special Economic Zones, where there are no
import duties, and invite investors from India as well as overseas to put up
- There is one good precedent in the 1,000-acre Brandix textile SEZ,
promoted by a Sri Lankan entrepreneur near Vijayawada.
- It has specialised in women’s underwear and is a major supplier to the
global luxury brand Victoria Secret.
- They claim that 60 per cent of the bras sold by Victoria Secret in the
US are made here.
- It has been growing and now employs over 18,000 women from nearby
villages who come in chartered buses for two shifts in the day.
- The allotment of land at reasonable/nominal/subsidised rates for
industrial parks for job creation has to be the guiding principle if labour
intensive organised sector manufacturing jobs for global supply chains are
to be created.
- Expensive land can undo the cost advantage of low wages.
- The SEZ regime could also be tweaked to treat sales to the domestic
market on normal import duties as meeting the foreign exchange earning
obligation of units in the SEZ.
- Some production for the growing Indian market would shift to the SEZ
creating jobs for Indians.
- Another bolder approach would be for the state to finance the creation
of Incubation Centres of plug and play garment manufacturing units in
- This would mean that work sheds with state-of-art stitching machines are
provided at a token rent to a start-up, say, a fresh graduate from a
fashion/ design institute with the agreement that as she succeeds, she would
pay higher rents and even buy the garmenting unit paying the full cost.
- Those who fail, and some would fail, could leave and look for jobs
without any liabilities. The cost of the failures could over time be borne
by the successes so that the Incubation Centre could grow and nurture an
increasing number of entrepreneurs.
- To have global scale, the Textile Parks need to be large. These may be
promoted by the state directly, or, through innovative public-private
- These could also break new ground by developing rental workers housing
which has so far been missing in industrial area development.
- However, staff housing is intrinsic to the IT SEZ development. Decent
housing at a reasonable distance from the work place makes a huge difference
to worker productivity.
- These ideas are equally relevant for other labour intensive sectors
ranging from toys to shipbuilding.
- The state needs to assume a larger responsibility than it has so far
been prepared to do for India to begin creating manufacturing jobs for
global supply chains on the scale needed.
- It also needs strategic thinking, patience and willingness to take
Q.1) Consider the Gandhian movements given below and the associated Indian
National Congress session in which the resolution for the movement was passed:
Movement : Session
1. Non-Cooperation Movement : Nagpur Session
2. Civil Disobedience Movement : Karachi Session
3. Quit India Movement : Calcutta Session
Which of the pairs given above is/are correctly matched?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 only
(d) 1, 2 and 3
Q.1) To what extent the state must play a greater role in creating
manufacturing jobs. Comment.
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