Exploring Industrial Performance in Textile Sector of India under Liberalised Trade Regime: A Study through Economic Capacity Utilisation

Abstract

This study attempts to evaluate and analyse the industrial performance of Indian textile sector in terms of economic capacity utilisation at aggregate level over a period from 1979-80 to 2008-09 and SWOT analysis has also been conducted to have an insight into the performance of the said industry. In this study, Optimal output  is defined as the minimum point on the firm’s short run average total cost curve and the rate of capacity utilisation is merely ratio of its actual output to capacity output level. Choice theoretic framework is adopted to estimate the optimal capacity output. The empirical findings suggest that there exist considerable variations in the capacity utilisation rates over years within same industry. There has been declining trend in the growth rate of capacity utilisation in this industry during post reforms period due to slow increase in actual output resulting from stagnated demand probably and rapid expansion of capacity output as a result of abolition of licensing rule consequent to economic reform. It has also been noticed that capacity utilisation in this particular industry has been gradually increasing after Multi-fibre Agreement (MFA) has phased out since 2005, and it continued till economic recession begins during 2008 and the industry is gradually striving harder to sustain its past achievement.