Export performance of Indian Textile Industry in the Post Multi Fibre Agreement Regime

Abstract

The Multi Fibre Agreement (MFA) and the quota system which governed the international trade in textiles and clothing came to an end on 1st January, 2005. The quota systems were more restrictive against cotton based fibres, which dominate India‟s textile exports. Since India has a natural comparative advantage in cotton and cotton based fibres, abolition of MFA was expected to benefit India‟s cotton industry as well as cotton based textiles and clothing sectors. This paper analyses the export performance of Indian textile industry in the post quota regime in terms of different sub sectors of Indian textiles during the period from 1992 to 2012.The entire period of the study is divided into Pre MFA (1992-2004) and Post MFA (2005-2012). Export performance has been examined in terms of annual growth rate and Compound Annual Growth Rate for the period from 1992-2012.The study finds that the textile exports have registered a strong growth rate in the post quota period (2005-2006), increasing from 2.69% in 2004-2005 to 23.14% in 2005-2006. A comparison of the different sectors of the textile export shows that all the sectors recorded an increase in the export values at different phases of the quota removal. If we compare the pre MFA growth (III Phase) and Post MFA growth (IV Phase), there has been a remarkable improvement in the export performance of all the sub sectors. Biggest gainer in the post MFA period is manmade textiles followed by cotton textiles and readymade garments. But India was not able to continue the same momentum in the succeeding years. This clearly indicates that Indian textile industry is facing so many challenges in the post quota regime. Thus, it is imperative to improve the competitiveness of our exports through policy changes, new investment and efficient supply chain management.