India: A Big Textile Outsourcing Hub

Multi Fiber Agreement was launched in the year 1974 in an attempt to bring in line both the textile industries of the developed countries and that of the developing countries. The textile industries are known for their labor intensive nature of commodity production. In fact labor has always been in surplus in developing countries. So naturally these countries are at better advantage in the production of textile related products and hence are able to supply goods at lowest prices. The fundamental idea behind the policy was to stamp out all kinds of quota system, and offer a level playing to all the countries of the world. The whole process of dismantling the quota system was over by 01.01.2005.

MFA is being looked upon as a stepping PERFORMANCE FABRIC stone by the experts with the help of which the Indian textile and apparel industry is expected to grow at a much faster rate. The assimilation of Indian industry with whole world started off from 1950s. Slowly, but surely it made its way into the top ten league of countries involved both in the export of textile and apparel products after 1998. According to the statistics released by United Nations Statistical Division, 2005, the average compounded growth rate of clothing item exports was around 13 percent. The report also underlined the fact that the textile industry alongside the apparel industry witnessed a jump of almost US$0.9 billion during 1985-2003 which is almost 15 times better than the base period.

The production of fabricated products by the between 2002-2003 and 2004-2005 increased at a rate from 41973 million square meters to 45378 million square meters. But with implementation of the MFA, the same increased from 45378 million sq. mts to 54260 million sq mts during the period between 2004-2005 and 2006-2007. Hence one can say there was a percentage increase in the fabric textile product from 7.5 percent during 2002-2003 and 2004-2005 to 16.37 during the period between 2004-2005 and 2004-2007. Thus the competitive edge bestowed by MFA is quite clear.

On an annual basis the cotton textile industry posted a growth rate of around 14.8 % while the products produced by textile industry clocked a growth rate of above 11%. The textile sub-sector involving silk, wool and man-made fibers have also seen a sharp increase in its growth witnessing 8.2% on a yearly basis.