Industry And Cluster | News & Insights

Policies that Led to the Growth of Textile and Garment Industry in India

Published: October 20, 2020
Author: Preeti Bhimte


Textile is the second largest employment generating sector in India. With an overwhelming presence of textile legacy, it has played an important role in the economic interest of India. The textile industries have been influenced by government industries since 1950s and from then till now India has been able to grab a significant position in the global market. 24 percent of the world’s yarn spinning sector has been occupied by India and 8 percent of the world’s rotors. With the abundance of raw materials and skilled man power, India is one of the few textiles producing countries with the complete value chain productivity strength. This paper focuses on textile and garment sectors and impact of long-range policy support that has been a key ingredient to the growth of textile industry in India. Huge investments are being made by Government under various schemes to encourage more private equity and to train workforce.


The Indian Textile Industry activities are extremely diverse as it has hand-spun and hand-woven sector at one end and the capital-intensive revolutionary mill sector on the other. Textile industry contributes to about 14 per cent of manufacturing value-addition, out of which around one-third of our gross export earnings provides fructuous employment to millions of people. India has abundance of natural raw materials like cotton, jute and silk. Indian fine designed, embellished and crafted products are highly preferred across the globe. At present industry is growing economically with 9-10 percent every year. Indian textile industry currently upholds a share of 4.7% in world market of textiles and clothing. Prime global garment and apparel brands have started their operations in India. Textile sector is being highly encouraged by the government by various programs and policies, which has been established by the Ministry of Textiles to provide assistance and hand holding support to businesses.

Technical textiles are another important sector for textile industry in the country. It involves making products such as synthetic geo textiles, polyolefin woven sacks, architectural membranes, automobile textile, medical textiles etc. Internationally known companies such as Ahlstrom, Johnson & Johnson, Du Pont, Procter & Gamble, 3M, SKAPs and Kimberly Clark have already set their units in India to produce technical textiles. In 2014, the technical textiles contributed made a major contribution i.e. 11.43% to the total textile production in India, as per Ministry of Textiles.


The government of India has planned many schemes to promote all textile sector of India that includes social welfare schemes, insurance cover, area development as well to upgrade outdated looms, tax benefits and propaganda support, and many more. The Government initiatives that has played a major role in strengthening textile production and encourage this industry to cater to the domestic and international markets efficiently are as follows:

Amended Technology Upgradation Fund Scheme for textiles industry (ATUFS)

The old machinery and technologies used in the textile industry can affect productivity and safety. ATUFS is designed to provide stimulus to entrepreneurs and business owners for upgrading technologies. A one-time capital subsidy will be offered to business owners from Technical Textiles, Garments, and Weaving. The Central Government will provide 15% subsidy to the garment, apparel and technical textile sectors.

Other sub-sectors will receive 10% subsidy for upgradation.

A fund of $2.7 Bn has been allocated for ATUFS scheme which was launched in January 2016. The funds will be spent over the span of next seven years. ATUFS facilities are expected to receive an investment of $15 Bn and create 3 million jobs in the country.

Under the Union Budget 2019-20, Rs 700 crore have been allocated for this scheme.

Scheme for Integrated Textile Parks (SITP)

Scheme for Integrated Textile Park has been planned to provide support for the creation of world-class infrastructure facilities for setting up of textile units.  Government of India (GoI) has grant up to 40% of the project cost subject to a ceiling of Rs. 40 crores.

However, GoI has grant up to 90% of the project cost for first two projects (each) in the States of Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim, Himachal Pradesh, Uttarakhand and Jammu & Kashmir; with ceiling limit of Rs. 40 crores for each textile park.

A total of 59 textile parks have been sanctioned under SITP by the Ministry of Textiles out of which 22 textile parks have been finalized and rest are under various stages of construction.

National Textile policy 2000

The National Textile Policy 2000 was framed about 13 years ago. Since then, the textile industry has experienced various modifications on the domestic and international front. The domestic textile industry has seen large-scale modernisation and technological up-gradation in the last decade and has also faced various new challenges.

Key areas of focus include:

  • Increasing contribution of private sector by setting environment-friendly and technologically advance textile units and complexes.
  • To Increase Productivity, Enhanced Marketing and Distribution, Technological Up-gradation and increase Research Development in Handloom Sector.
  • To Produce cloth of good quality at acceptable prices that can meet the growing needs of the market.
  • Constantly contributing to the provision of sustainable employment and the economic growth of the nation.
  • Compete with confidence to achieve a larger share in the global market.
  • Recently, the updated draft for this policy was formed which ensures to employ 35 million by attracting foreign investments. Government is highly focusing on establishing a modern apparel garment manufacturing hub in every North Eastern state for which it has invested an amount of US $ 3.27 million.

Foreign Direct Investment (FDI)

Textile and apparel sector in India have one of the most liberal investment policies for foreign investments. Through Automatic Route 100 per cent foreign direct investment (FDI) is allowed in India.

Automatic Route says that the non-resident investor or the Indian company do not require any sort of approval from Government of India for the investment.

With the arrival FDI, India increased to $55.56 bn in 2015-16, $60.22 billion in 2016-17, $60.97 bn in 2017-18 and in 2018-19 India noted its highest ever FDI inflow of $62.00 bn. Moreover, India has been able to attract more than $74 bn investments across sectors during 2019-20.


The Ministry of Textile and Union Ministry of Powe have jointly launched a scheme called SAATHI (Sustainable and Accelerated Adoption of efficient Textile technologies to Help small Industries). Under this initiative, Small and Medium Power loom units will be provided with energy efficient power looms, motors and rapier kits at no advance costs by Energy Efficiency Services Limited (EESL), which is a Public Sector Undertaking under the Ministry of Power.

  • Key clusters such as Ichalkaranji, Surat, Erode etc have been chosen for the implementation of the scheme.
  • The initiative is based on the accumulation, bulk acquirement and financing model that EESL has successfully posted in several sectors like Electric Vehicles, Smart Met Meters and LED bulbs.
  • Under this initiative, the owner of the unit does not have to assign any advance capital cost to procure this equipment. He also does not have to administrate additional expenses for repayment.
  • The accumulation of demand and bulk acquirement leads to a reduction in capital cost and benefits of it can be passed on to power loom units so that their repayment amount and period would lessen.
  • Use of this efficient equipment results in energy savings that in turn, leads to cost savings to the owner of the unit. This helps the owner repay the equipment cost to EESL in instalments over a period of 4 to 5 years.

 Merchandise export from India Scheme

The Government of India has introduced Exports from India Schemes through the Foreign Trade Policy (FTP) 2015-20 with came into effect from 1st April 2015.

  • Merchandise Exports from India Scheme (MEIS) and Service Exports from India Scheme (SEIS) are the two schemes for export of merchandise and services which has been designed with the goal of making India’s export products more competitive in the global markets.
  • As part of this, the Government has provided rewards to exporters to counterbalance infrastructural efficiencies and associated costs involved and to supply exporters with a level field.
  • In the new draft of this policy the Directorate General of Foreign Trade (DGFT) has revised rates for incentives under the Merchandise Exports from India Scheme (MEIS) for two divisions of Textiles Industry that are ready made garments and made ups from 2 percent to 4 percent.

Scheme for Capacity Building in Textiles Sector (SCBTS)

This skill development scheme named ‘Scheme for Capacity Building in Textile Sector (SCBTS)’ was approved by the Cabinet Committee on Economic Affairs (CCEA) in 2017 with an expenditure of Rs 1,300 crore from 2017-18 to 2019-20. The programme aims at skill development of 10 lakh youth by 2020 which covers the entire value chain of textile sector except spinning and weaving.

  • The key focus of this scheme is to provide a demand driven and placement-oriented skilling programme to create jobs in the organised textile sector and to promote skilling and skill up-gradation in the traditional sectors.
  • The scheme enables to provide sustainable livelihood either by wage or self-employment to all section of the society throughout the country.
  • Through this programme various types of training are being provided in advanced technology-oriented features like Aadhaar Based Biometric Attendance System (AEBAS), CCTV recording, dedicated call centre, mobile app-based Management Information System and online monitoring
  • To take Samarth – Scheme for Capacity Building in Textile Sector (SCBTS) forward, sixteen state governments have signed memorandum of understanding (MoU) with the Union ministry of textiles.


Government is formulating various New Textile Policy for overall development of the sector. Inputs from all the state governments, individuals through e-portal and different federations are being asked under broad topics like natural fibres, man-made fibres, handloom, handicrafts, power loom, technical textiles, technology and machinery advancements, infrastructure for spinning, weaving and processing and human resource development.

In order to address various problems faced by textile industry government has implemented various schemes to provide support to Textiles & Apparel Sector: –

  • Government has launched a separate scheme for development of Knitting and Knitwear Sector under Powertex India to boost production in knitting and knitwear cluster at Ludhiana, Kolkata and Tirupur.
  • For Handlooms: National Handloom Development Programme, Comprehensive Handloom Cluster Development Scheme, Handloom Weaver Comprehensive Welfare Scheme and Yarn Supply Schemes are being worked or integrated and holistic development of handlooms and welfare of handloom weavers.
  • For Handicrafts: National Handicrafts Development Programme (NHDP) and Comprehensive Handicraft Cluster Development Schemes are being updated to provide maximum benefits to the artisans.
  • An integrated Scheme for development of silk i.e. Silk Sangram. The focus of the scheme is to improve the quality and productivity of domestic silk so that the country need not to be dependent on imported silk.
  • Jute ICARE is another initiative for increasing the income of farmers through different interventions and create awareness among the growers regarding the latest technologies.
  • To increase the economy, North East Region Textile Promotion Scheme (NERTPS) has been implemented for promoting and contributing towards the textile industry for state-of-the-art production at large scale. It will contribute to India’s GDP, domestic and international exportation and also preserving cultural heritage.


In Indian economy, the contribution of textile industry is immense and remarkable. The Indian textile industry stands to benefit immensely from the various textile policies initiative. The vision of these scheme has the potential to repair the segments perception and the country’s involvement in the world textile scenario. The unique combination of democracy, demography, and demand of India has enabled it to attain the utmost position in the global market. The combination of the new international strategy of the government will lead textile industry to more job creation, boosting the national economy and helped the Indian economy in grabbing global recognition. With a 100% FDI, National Textile Policy 2000, Scheme of Integrated Textile Park and other provisions provided by the government to the textile sector has been proved beneficiary to the manufacturing unit of the textile industry in India.


  1. A Critical Analysis Of Indian Textile Industry: An Insight Into Inclusive Growth And Social Responsibility; Lal R.C., Professor, Dr. Multanimal Modi College, Modinagar & Chaudhary Charan Singh University, Meerut, India (2019)
  2. Effect of make in India on textile sector; Sujit Gulhane, Ranjit Turukmane Centre for Textile Functions, Mukesh Patel School of Technology Management and Engineering, India (2017)
  3. The Impact of Government Policies on the Textile and Garment Industries of India Jayati Ghosh, University of Wisconsin-Whitewater
  4. A role of textile industry in Indian economy; Divya P Solanki Assistant Professor, Mirambika College of Management, Rajkot, Gujarat, India; Volume 3; Issue 3; September 2017; Page No. 60-65
  5. Launch of Scheme for Development of Knitting and Knitwear Sector; PHD Research Bureau



Related Posts