The Productivity and Technical Efficiency of Textile Industry Clusters in India

Abstract

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 (E). The sector employs nearly 35 million people and after agriculture, is the second‐highest employer in the country. Its importance is underlined by the fact that it accounts for around 4 % of Gross Domestic Product, 14 % of industrial production, 9 % of excise collections, 18 % of E in the industrial sector, and 16 % of the country’s total exports (Ex) earnings. For inclusive growth and sustainable development most of the Textile Manufacturers has adopted the Cluster Development Approach. The objective is to study the physical and financial performance, correlation, regression and Data Envelopment Analysis by measuring technical efficiency (Ø), peer weights (λ_i), input slacks (S⁻), output slacks (S⁺) and return to scale of four textile clusters (TCs) namely IchalKaranji Textile Cluster, Maharashtra; Ludhiana Textile Cluster, Punjab; Tirupur Textile Cluster, Tamilnadu and Panipat Textile Cluster, Haryana in India. The methodology adopted is using Data Envelopment Analysis of Output Oriented Banker Charnes Cooper Model by taking number of units (U) and number of E as inputs and sales (S) and Ex in crores as an outputs. The non-zero λ_i’s represents the weights for efficient clusters. The S > 0 obtained for one TC reveals the excess U (S⁻) and E (S⁻) and shortage in sales (S⁺) and Ex (S⁺). To conclude, for inclusive growth and sustainable development, the inefficient TC should increase their S/turnover and Ex, as decrease in number of enterprises and E is practically not possible. Moreover for sustainable development, the TC should strengthen infrastructure interrelationships, technology interrelationships, procurement interrelationships, production interrelationships and marketing interrelationships to decrease cost, increase productivity and efficiency to compete in the world market.