India’s textile and clothing sector is currently estimated at $108 billion, contributing to 12.5% of our export earnings. This sector employs 40 million people directly and 60 million indirectly. Industry’s moderate expectation in skills has meant that this sector can make the transition toward industrial economy a smooth journey. Despite its potential to employ many people, it is dependent on capital at all elements of value chain. In other words, the demand for low wage labour is conditional to sufficient stock of upgraded capital. In this aspect, most of the sector suffered as their technology was outdated. Clothing as a product exhibits dynamism and has led to new business models which now incorporate just-in-time deliveries, low inventory, mechanization and constantly evolving consumer preferences. Regressive policies largely derived from planning era clubbed textile and clothing with other manufacturing industries. This meant stringent labour laws, reservation to small-scale industries, segmented fiscal levies, hindrances in capital import had to be borne by the sector. In the meantime, other countries reaped the benefits by manufacturing and exporting textile and clothing products at India’s cost.
With technological upgradation comes the demand for skilled labour. India has failed on both the counts. Although India has attempted technological upgradation through Textile Modernization Fund in 1985 and Technological Upgradation Fund Scheme (TUFS) in 1999, the progress not uniform across elements of value chain. While spinning mills are fairly modernized, the handloom and powerloom are not. Majority of units under mill sector is permanently ‘sick’ and under the control of National Textile Corporation sitting with idle spindles awaiting closure. In this context, it is fair to suggest that liberalization through dilution of labour laws is not a magic wand and while I cannot suggest if it is necessary or not, it is certainly not sufficient. National Textile Policy of 2000 addresses skills a handful number of times in the context of enriching the skills of handloom workers to help them find alternative employment. It is pertinent to mention my visit to the decentralized powerloom, garment unit and a spinning mill in Rajapalyam and Virudhunagar in Tamil Nadu where no one really complained about labour laws, but the need for skilled labour was strongly felt.
Tight coupling of technology and skilled labour, complimentary inputs to production system should move the policy focus from employment to employability. There is a need to address their mutual progress in an organic bottom-up relationship rather than a top down line item in a central or a state budget. This is not a problem unique to India. Most parts of the world, especially the industrialized and the newly industrialized countries accustomed to Fordist system of mass production found it extremely difficult to incorporate the flexibility of taking technology and skills of labourers on the upward trajectory at the same time. Fordist specialization derived largely from Frederick Taylor’s principles of scientific management was questioned. The changing consumption preferences and the need to have a broad product base questioned the basic principles of specialization.
At a firm level, it was not sufficient to be able to manufacture a single product to sustain. At the level of the labourer, mastering one machine or technology was not enough. The former needed machines that could be multipurpose and the latter needed to be trained to use multipurpose machines. How can a policy provide this flexible specialization. Michael J. Piore and Charles F. Sabel reinvigorated the argument to have systems to facilitate flexible specialization in their book, ‘The Second Industrial Divide: Possibilities for Prosperity’. Some of the key elements of flexible specialization are multipurpose equipment and innovation, skilled labour with innovative mentality to satisfy the demand, cluster of enterprises or small firm communities which become a seedbed for exchange of ideas allowing for institutions to develop and intervene meaningfully, interaction and networking between small and large groups and between small groups. From a public policy point of view, one needs to be concerned about devising strategies that encapsulates the structures, institutions and relationships of flexible production model. Industrial district is considered a logical conclusion of this concept in an ideal scenario. Industrial district should not be mistaken with the industrial estates developed by British in its erstwhile colonies or with Albert Marshall’s usage in ‘Principles of Economics’. Industrial district referred to here is a dynamic conceptualization of Marshallian industrial district due to its evolving behaviour due to the changes in structures, institutions and relationships between the actors. The basic form of agglomeration of people or firms leading to cluster is a location cluster. With strategies by governments or due to market itself, this location cluster evolves into local market cluster, innovative cluster and finally industrial district. Tiruppur is recognized as one of the informal sector which has largely come up due to local communities.
India has set up special economic zones (SEZs) for specific industries typically in the area of information technology (IT), but include biotechnology and some textile industries. In the last decade, it has set out building location clusters specifically for textile and clothing sector through textile parks. The policy of setting up of Textile Parks appears to be heavily focused on structures through its orientation on infrastructure and not on the associated institutions and relationships. For example, one of the important features of industrial districts is the need of strong local institutions. Policy driven by central government typically implies neglect of local institutions. The implicit requirement of building long lasting institutions and facilitate establishing relationships between the firms, employees are not easy tasks. Political considerations with short election cycles imply attempts at short cut solutions rather than systemic changes. Questions remain whether these textile clusters will evolve into industrial districts or is there something to be learnt from organically developed clusters which show robustness at times of adversities, a necessary precondition for a successful industrial district.