India's textile industry fighting steady decline

In India, the saying goes, every industrialist got his start by owning a textile mill.

The trouble with India's textile business, however, is that the same industrialists don't usually end up in textiles. Many of them simply skim off the profits to invest in other businesses.

Today, for various reasons, the industry is more than frayed at the edges. A costly textile strike in Bombay, which commands 40 percent of the industry, ended after seven months only last week. Recession in the West and international protectionism threaten exports. And a new liberal government policy toward expansion of other industries only speeds up the textile tumble.

To be sure, textiles are still a long suit for India. One in 4 nonagricultural workers is employed in the mills, and textiles are India's largest industry, accounting for 17 percent of total industrial production.

The first weavers settled in Bombay with the arrival of the British East India Company in the 16th century, and by the 1800s cotton mills spread rapidly. The American Civil War gave India its first crack at world markets. By Indian independence in 1947, the industry was strong enough that the government felt it did not need protection from competition, as did other ''needed'' industries.

The result: About 100 of the nation's 700 mills began to show a loss in the 1960s. They would have closed up shop but for the socialist practice of nationalizing so-called ''sick'' industries to keep jobs.

Meanwhile, India's share of world textile trade has fallen in the past two decades from 15 percent to about 4 percent today, partly because of East Asian competition.

The National Textile Corporation, set up in 1974 to revive the mills, has recorded only losses. Last year it was in the red by $120 million. But it justifies keeping the workers' jobs because it collects about $1 billion in taxes on its own textile sales.

So far, the public corporation has spent about $200 million in new plant and equipment and plans to allow imports of machinery to improve production. Meanwhile, 22 other mills have hit hard times in the last few years but have been taken over by state governments. More bankruptcies are expected because of the strike.

Ironically, the long strike in Bombay did not result in a drop in Indian textile production. Three million handloom weavers in villages, and the 600,000 power looms in small towns, have made up for the loss, says V. K. Shunglu, managing director of the National Textile Corporation.

With about one-quarter of textile mills now considered either profitless or barely surviving, the industry would seem to have no future. But polyesters have risen rapidly to 10 percent of the trade, which has been dominated by cottons. And the superstar of polyester producers has been Reliance Textiles, a company growing about 40 percent a year.

The government considers synthetics a luxury, slapping a 400 percent excise tax on them. But Reliance's unusual aggressiveness in the dormant industry, and its ability to get licenses for expansion, have shown other millowners what can be done.