The phasing out of the MFA in India

Some of the poorest countries in Asia that benefited from the export quotas and developed textiles and garment industries under the MFA are now facing challenges in sustaining textile and apparel production, while the other countries like China, India, Indonesia, Pakistan etc seem to have increased their exports to the United States and Europe (UNDP 2005a, 2005b). The Asian economies are involved in tough competition with each other to increase exports, which exerts pressure on wages, terms of employment, technology, and form of production in not only the apparel and textile sectors, but also other traded and non-traded sectors.

The manufacturing sector in India in the post reforms period has not generated much employment in the economy, particularly in the organized sector. This is mainly due to the increase in the capital intensity of the sector. Though some employment has been generated in this sector, most of it is in the un-organized sector, managed through sub contracting and outsourcing. The textile and garment industry, which contributes significantly to national exports and national income, is important for employment generation. The expiry of MFA is therefore important for the economy, as it can generate large scale employment and enable the country to promote a labour intensive export based strategy for development.

India has several advantageous so far as its T & G industry is concerned. These include a strong Multi fibrr base (I think a general spell check to conform to either British and American spelling syle may be helpful!), the largest loomage and second largest spindlage in the world, wide range of production with a wide range of production technology, a vast pool of skilled labour, dynamic entrepreneurship as well as a flexible production system, a huge domestic market and a broad production base within the country. In short, it has, within the country, a good supply chain. However, the industry is also facing several constraints like power shortage, infrastructure gaps, fragmented production units etc.

The government as well as the industry has taken several initiatives to fight these limitations and to promote exports. In fact, these initiatives have created euphoria and the industry is experiencing a boom period. The industry is growing rapidly along with its exports.

The boom has brought about several changes in the characteristics of the industry as well as its labour hiring practices. Two major trends are observed in this context. On the one hand the industry is moving towards high value added products, where the technology is improving fast, the average size of the unit is increasing, and labour productivity and wages are growing (though wages are not growing fast). On the other hand in low / medium value products the industry is depending more and more on sub contracting and out sourcing to home based and non home based units. The industry is decentralizing here and with cost cutting measures, the employment quality is declining fast in this segment.

Women, however, are losing in both these segments. Their share in employment is declining in the high value added segment, as women do not usually possess the required skills. Their share is increasing in the lower segment, mainly in the unorganized sector, where the quality of employment is very poor. In other words, the textile boom is not benefiting women enough either in the value added segment or in the unorganized segment.

Gender inequality in the labour market is reflected in all major labour market outcomes; employment and unemployment, industrial and occupational segregations, employment, wages and related benefits and access to improved skills, productivity and upward mobility. The data on gender wage gap, which is an important indicator of the gender inequalities in the labour market, has increased in all the sub-sectors of the industry and in all the segments. The highest wage gap is in the organized formal sector, which is managed most professionally, and the lowest gap is in the unorganized home-based sector. In the handloom and handicraft sector, however, new models have emerged that have combined successfully the heritage, professional management, employment intensity and gender equity. These models are produced by NGO managed production units like Fabindia, Desi, Anokhi, SEWA etc, who seem to be exporting on a scale and promoting gender equity in the labour market in many ways.

Source: Extract from a paper by Indira Hirway, Centre for Development Alternatives, India