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Empowering MSME Growth: Unlocking Financial Solutions for Textile Industry Expansion

Published: November 22, 2023

India has a rich heritage in weaving and spinning fibres, dating back to the Indus Valley Civilisation. Over the years, the country has transformed into the world’s second-largest producer of textiles and garments. With a diverse range of segments such as traditional handloom, handicrafts, wool, and silk products, the Indian textile industry has become a vital contributor to the country’s economy. However, to achieve its ambitious goal of a $5 trillion GDP, the industry needs to overcome significant challenges and bridge the credit gap for MSMEs.

The Textile Industry’s Historical Significance

The modern textile industry in India originated in Mumbai and Ahmedabad in the 1800s, taking advantage of the abundant availability of raw materials such as cotton, wool, jute, and silk. Today, the industry contributes 2.3% to the country’s GDP, generating substantial employment opportunities for skilled and unskilled labour. It also boasts a 4% share in global trade for textiles and apparel.

Government Initiatives and Policy Support

Recognizing the potential of the textile industry, the government has introduced several initiatives to promote growth and enhance production capacity. The Make in India initiative has already led to a 25% increase in production capacity, while the recently approved PLI scheme worth Rs 10,683 crore aims to further stimulate the sector’s growth. Additionally, allowing 100% FDI under the automatic route in the textile sector has opened doors for increased investments.

The Role of MSMEs

The Micro, Small, and Medium Enterprise (MSME) segment plays a crucial role in the textile industry’s growth and overall economic development. India has over 1.47 crore registered MSMEs, contributing over 30% to the country’s GDP and more than 40% to exports. However, these enterprises face significant challenges, including insufficient access to formal credit, poor integration of technology, and production processes that hinder meeting global standards.

Addressing the Credit Gap

MSMEs in the textile industry have struggled to access formal credit due to their inability to provide collateral. This limitation hampers their growth and burdens them with higher interest rates. Government schemes such as the Emergency Credit Line Guarantee Scheme (ECLGS) and Pradhan Mantri Mudra Yojana have been instrumental in extending formal credit opportunities. Non-banking financial companies (NBFCs) have also played a crucial role in providing collateral-free loans at lower rates, ensuring the availability of finance to the doorstep of MSMEs.

L&T Finance: Empowering MSMEs in the Textile Sector

As a leading NBFC, L&T Finance has been supporting MSMEs in the textile industry by offering customised financing solutions. Operating across major textile hubs such as Gujarat, Maharashtra, Tamil Nadu, Karnataka, Punjab, Bihar, and West Bengal, L&T Finance provides loans up to Rs 50 lakhs without collateral. Its easy and flexible repayment options, low-interest rates, and doorstep financing services cater specifically to the needs of MSMEs.

Integrating Technology for Global Standards

To thrive in the global market, MSMEs in the textile sector must integrate technology into their processes. This transformation will enable them to meet international standards and contribute effectively to India’s goal of becoming a developed nation by 2047.


India’s textile industry holds a glorious legacy and immense potential for future growth. With the government’s support, combined with the efforts of financiers like L&T Finance, MSMEs in the textile sector can overcome hurdles and seize opportunities. By bridging the credit gap, integrating technology, and expanding their global reach, MSMEs will undoubtedly play a pivotal role in shaping India’s textile industry and propelling the country towards its economic aspirations.

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