Enhancing the Competitiveness of Textile Industry in an Emerging Economy : the Role of MSME

Abstract

Globalization and trade liberalization has ushered in new opportunities in Emerging Economies (EE) as well as challenges for MSMEs. EE and their enterprises face major challenges in strengthening their human and institutional capacities to take advantage of trade and investment opportunities. Presently, only a small part of the MSME sector is able to identify and exploit these opportunities and deal with the challenges competitively. India has over 26 million MSMEs producing a diverse range of products from very basic to highly sophisticated products. MSMEs contribute 8 per cent of the country's GDP, 45 per cent of the manufactured output and 40 per cent of our exports. They provide the largest share of employment after agriculture. They are the nurseries for entrepreneurship and innovation. They are widely dispersed across the country and produce a diverse range of products to meet the needs of the local markets, the global market and the national and international value chains. The Indian textile industry is one the largest and oldest sectors in the country and among the most important in the economy in terms of output, investment, and employment. With direct linkages to the rural economy and the agriculture sector, it has been estimated that one of every six households in the country depends on this sector, either directly or indirectly, for its livelihood. Despite being such an important industry, at the global level India's textile exports account for just 4.72% of global textile and clothing exports.

As MSMEs are expected to play a critical role in the growth of EE, the paper analyses the current trends, challenges, competitive dynamics and the future outlook for the segment. It aims to recommend the policy measures to harness their undoubted competitive edge to avail the unfolding opportunities and introduce the best elements of industrial competitiveness to the MSMEs.