The Small and Medium Size Enterprises play pivotal role in the Indian economy. This fact was highlighted by India’s Union Finance Minister while giving out the Union Budget for the year 2022. These SMEs are considered as the growth drivers, not only in India, but for any economy all over the world. They are seen as source for getting rid of poverty, especially in a developing country like India’s. Globalisation and free trade have helped in getting new and profitable opportunities for these SMEs. However, the true potential of these SMEs is yet to be realised, mainly due to the tough challenges that haunt the industry.

A large part of the Indian industry is made up by the SMEs. These SMEs have characteristics like short gestation period and low administrative costs. Moreover, they are labour intensive in nature and have a large potential for employment generation. They also help in inducing growth of the industrially backward regions, which in turn ensures a balanced regional development.

The Indian Textile Industry

The Indian Textile Industry is one of the oldest industries in the country. Often called a mother industry, the textile industry is the second largest employment generating industry in India, second to agriculture. It is one of the largest yarns producing industry, as a whole on the international level. India is a world leader when it comes to production of jute fibre, second when it comes to production of silk and is amongst the top producers for cellulosic and synthetic yarns as well. The textile industry is directly connected to the rural economy of our country as major part of our agricultural land is in the rural areas Furthermore, the local handicraft artisans who utilise these fibres are also a part of these rural areas and have been carrying the trade from generations together, passing on this artistic legacy to the newer generations as they come. The cotton cultivation that is done in India accounts for the home textile and apparel segment which constitute the major part of the textile industry. Most of this production is carried out in fragmented units scattered in towns and villages across the country and account for the SMEs of India.

The SMEs in Indian textile industry are a result of the numerous government-led initiatives and various incentives provided for these ‘Lahu-Udyogs’ under different schemes. One such example is the recent ‘Make in India’ campaign which is focussed on generating domestic employment for the youth and utilising the strong raw material base in our country with the help of the innumerable skilled and unskilled personnel, cheap labour and a promising export potential. The textile industry is fragmented, yet is accounts for a significant part in the Indian economy.

Indian Textile SMEs: A Ray of Hope

The Indian textile industry constitutes numerous clustered and independent SMEs. This is one of the advantages of the industry as it makes it self-reliant and independent. It also brings in the much-needed flexibility in the processing of the textiles across the entire value chain. Moreover, with a handy stock of raw material and the abundance of resources, these SMEs can use in their design expertise to generate high-quality products with enough variations for the customers. The SMEs generate employment which in turn has many positive social impacts as well, like an improved standard of living, low crime rates due to availability of money and awareness about social causes like education, generated by the general socio-cultural programmes held for the workers at their workplace, to name a few. All this eventually leads to regional development using technological advancements and it eventually contributes to the National Economic Growth.

The Challenges in Store for the Indian Textile SMEs and How to Overcome Them

The situation of the SMEs in India may seem promising and glittery looking from the superficial side. However, there are a few challenges that these industries face, which are as follows:

  • High Cost to Credit
  • Collateral Requirements
  • Limited Access to Equity Capital
  • Timely Procurement of Raw Materials
  • Problems of Storage, Designing, Packaging and Product Display
  • Lack of or Limited Access to the Global Markets
  • Inadequate infrastructure facilities, including power, water, road, etc.
  • Lack of Access to the Latest Technological Developments
  • Lack of skilled manpower for process of manufacturing and marketing
  • Branding and Marketing

These challenges have a few logical and ready to be implemented solutions available. This includes imbibing best innovation practices that are accepted globally, adopting and using the latest technologies for product development and marketing, creating reliable networks and effective management in across the supply chain.

On a larger level, use of renewable energy sources to ensure cost-cutting the in the manufacturing process, establishment of Innovation Centres or Centres of Excellence for the textile industry, setting up of Special Economic Zones dedicated to textile industry, granting tax incentives, developing a partnership amongst the stakeholders, empowering women, integrating the industry, quality improvement, appropriate marketing across the globe, exhibitions and guidance centres for the local people involved, promoting lean manufacturing techniques, carving out niche schemes specifically designed for the textile SMEs are some of the measures that can be taken to improve the existing structure of the Indian textile SMEs.


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