Apparel April 2019 Apparel May 2019 issue | Page 64

INDUSTRY INSIGHTS
The Post-MFA Regime
With the Multi-Fibre Arrangement (MFA) gone, why hasn’t India picked up steam in the textile
industry? Is GST and demonetisation to blame? Janice Goveas analyses.
The textile industry has played a vital role in India’s
economy in terms of employment generation,
strengthening the rural base, and earning foreign
exchange through exports. This industry provides
direct and indirect employment to over 32 million
people. India’s textile sector, which covers
everything from fibre to garments, is the second
largest employment provider after agriculture.
The industry has the potential to double this
employment over the next five years. It not only
provides livelihoods to millions of households, but
is also a storehouse of traditional skills, heritage,
and a carrier of heritage and culture. The textile
and apparel industry in India is currently valued at
around US$127 billion in size.
Globally, the apparel industry contributes
to employment in developed countries. In the
European Union (EU), for example, the sector
is dominated by small and medium-sized
enterprises concentrated in several regions that
are highly dependent on this sector. On the
other hand, developing countries have a natural
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May 2019
advantage in textile production due to low labour
costs. Textiles and clothing are also among the
sectors where developing countries have the most
to gain from multilateral trade liberalisation.
In order to protect the domestic market from
imports of developing countries, the Multi-Fibre
Arrangement (MFA) was introduced by developed
countries in 1974. The MFA extended restrictions
on trade to wool and man-made fibres in addition
to cotton. It imposed quotas on the amount
developing countries could export to developed
countries, which resulted in job and export
loss in developing countries. The MFA was not
compatible with the free trade philosophy and
violated the principles of the multilateral system.
THE EFFECT OF MFA ON INDIAN
TEXTILE AND APPAREL
The MFA affected the growth potential of the textile
and apparel sectors in India. The industry has been
severely restricted through domestic regulations
and international factors. Government regulations