How the handloom sector can be revived

Like every year, India celebrated the National Handloom Day on August 7, 2021. The handloom industry plays a key role in the Indian economy — from providing employment to rural population to being a carrier of India’s rich cultural heritage to other countries. According to handloom census 2019-20, the handloom sector creates around 35 lakhof direct employment. If other industry stakeholders are considered — other textile manufacturers, fashion designers, etc. — this number will be much higher as because it includes other textile , making this the second largest source of employment for rural population after agriculture.

However, handlooms do not form a major portion of Indian textile exports. According to the Handloom Export Promotion Council (HEPC), the handloom exports from India fell from ₹2,353.33 crore in 2015-16, to ₹2,245.33 crore in 2019-20.

Handlooms in India epitomise the cultural richness and showcase the artistry of the weavers across the world. Historically, weavers in India enjoyed high bargaining power. With the industrial revolution gradually eroding this bargaining power, the weavers became economically backward, and the perception of handlooms changed from that of a cultural activity that paid rich dividends to a barely sustainable activity.

While the advent of powerlooms reduced the textile industry’s reliance on handlooms, the latter did not lose their significance for the Indian rural population. Handlooms, unlike powerlooms, are embedded into the social milieu of the nation. Many government policies have been trying to revive the Indian handloom sector since independence. However, most of these policies have limited success.

Problems in the industry

The lack of effective policy support combined with the fragmented nature of the sector has given rise to many problems. Most of the problems concerning the sector can be broadly categorised into weaver and supply chain problems.

The first and foremost problem that a weaver faces is the lack of financial viability. According to the Handloom Census, approximately 67 per cent of the weavers still earn less than ₹5,000 a month, which is less than the amount that an unskilled worker earns as per the minimum wage rule. The problem of low income has resulted in a decrease in the overall number of weavers from 43.31 lakh in 2009-10 to 35.25 lakh in 2019-20.

In addition, existing weavers are not showing an interest in handing the tradition over to their next generations. Further, most of the weavers depend on indirect sources of credit with high rates of interest. This is due to the low penetration of banking facilities among the weaver community. According to the handloom census, approximately 76 per cent of the weavers do not have access to banking facilities, let alone credit facilities from banks.

While these problems affect the weaver community at an individual level, there are numerous process-related problems affecting the supply chain as well. The primary problem lies in the procurement of raw material. Most of the yarn purchased by weavers (approximately 76 per cent) is from the open market and the remaining is from government and co-operative societies.

The price fluctuations in the open market eat up the profit margins of the weavers. On the marketing side, adequate sales support and proper branding are almost non-existent for the finished goods, due to which 64 per cent of the sales happen in the local markets. Furthermore, there is no simple way for a consumer to purchase an authentic handloom product via an e-commerce channel.

Government policies

To overcome these problems, the Government has provided various incentives and benefits to the weavers (Figure 1). Some of these policies are designed to address weaver problems, and others are designed to address supply-chain problems.

The NHDP and CHCDS policies encourage the formations of clusters at block-level and mega-level. Both these policies provide financial assistance to the weavers in clusters with respect to raw material procurement, production and others, indirectly helping them to earn higher margins. Some policies prioritise the construction of handloom parks and textile parks to increase employment opportunities (weaving and allied activities) in the country.

The latest announcement by the government to construct seven textile parks in three years is also one such initiative to expand the industry. In addition, the government is trying to educate weavers about various benefits of the formal credit system. However, considering the poor literacy rate of the weavers and the long waiting time involved in loan processing, weavers shy away from approaching banks.

To address the supply-chain problems, the Yarn Supply Scheme provides benefits to the weavers in the form of subsidies for purchasing yarn. However, this scheme does not ensure the availability of yarn to all the weavers and does not completely address the non-availability of raw materials. In recent times, marketing of the handloom products has been given high importance by the government.

New schemes are introduced year-on-year to promote the use of handlooms extensively. The melas and urban haats are set up regularly for the sale of products. Exports are also promoted. Further, to shield the handloom sector from external branding and to increase the authenticity of products, ‘India Handloom Brand’ has been created and promoted extensively by NHDP. However, in this e-commerce era, online channel of sale has not been given enough importance. Though the government is promoting some e-commerce websites for the sale of handloom products, the quantum of sales through e-commerce channel so far has been low.

Although there are many schemes and facilities offered by the government of India, most of the weavers do not know the existence of these facilities. As per the census 2019-20, the awareness about different benefits that can be availed of by weavers averages 17 per cent for a selection of 11 schemes. This suggests an extremely poor awareness of the policies amongst weavers. Based on the policy analysis and interviews with weavers, the effectiveness of government policies in addressing the problems with regards to their importance to the weavers is plotted in Figure 2.

The graph shows, for each problem, the effectiveness of government addressing the problem and the weavers’ perceived importance of the problem. For example, weavers consider low earning to be a more significant and immediate problem than marketing of handloom products, which is more of an industry level problem. The graph highlights the difference between the weavers’ perspective and the focus of the government policies.

Recommendations

The difficulty in implementing any policy to address the problems in the handloom industry lies in the vast spread of weavers across various geographic locations of the country. Any policy for addressing the industry problems must involve the following factors:

Network of weavers : An efficient central network is necessary for disseminating important information to the weavers.

Transparency and awareness of business processes: The weavers’ awareness of the finance and sales processes must be improved.

Flow of information between weaver and consumer: Weavers should possess information about the market for their products.

The current establishment of handloom weavers into clusters and co-operative societies dampens the inherent entrepreneurial nature of the weavers. So, instead of segregating, a network of external centres can be built to facilitate the diverse needs of the various weavers’ communities.

Structure and features of the network

A handloom institute is to be established in every handloom town/city to create an individual identity for all the weavers and allied workers.

Each institute should act as a point of contact for weavers to sell on the government’s e-commerce website (Figure 3). The institute should help weavers familiarise themselves with the e-commerce portal and train them on how best to use the portal.

Each institute should act as a delivery channel for the flow of information and government benefits to the weavers.

Institutes should be able to provide design support and training support to the weavers. The institutes can have an in-house designer who can provide this support.

These institutes can liaison with local banks to provide credit facilities for the weavers. The institute should educate the weavers on the advantage of the credit facilities and also help them in the process of obtaining credit with the local banks.

These institutes need to function as a formal government entity (like a nationalised bank) with definitive rules and regulations rather than an autonomous body like clusters or co-operative societies. The primary function of these institutes should be to increase the reach of government support to the weavers.

This type of an organisational structure can ensure that benefits and information reach each weaver. It also establishes a formal channel for the weavers to understand the financial benefits they can get from banks. Weavers can leverage these systems to avail themselves of credit from formal systems at lower interest costs, which in turn can increase their overall profit margins. The various support systems included under the umbrella of a handloom centre can make the functioning of the handloom industry more efficient.

Finally, the digital transformation of the world in the e-commerce era calls for a change in the existing systems to better leverage the current technologies. Creating a structure that can help the weavers adapt to and utilise these new technologies and platforms will increase the competitive advantage of the weavers in the handloom sector.

Lakshmi is an e-PGP student and Abhiman Das is Professor of Economics and Chairperson of Misra Centre for Financial Markets and Economy, IIMA