Reviving Khadi in India

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Case Details:

Case Code : BSTR055
Case Length : 9 Pages
Period : 1985 - 2003
Organization : Minister for Small Scale Industries
Pub Date : 2003
Teaching Note :Not Available
Countries : India
Industry : SSI

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Khadi has fallen to disrepair. It had to be repackaged, upgraded, cleaned up."

- Vasundhara Raje, Minister for Small Scale Industries, 2001.

"Khadi is a natural fabric and unique. The rustic, no machine look of the fabric is both sophisticated and bohemian."

- Ritu Kumar, Fashion Designer.

"If the supply chain and production can be streamlined, the potential for khadi is high."

- B.S.Nagesh, CEO, Shoppers' Stop.

Khadi Loses its Sheen

Khadi,¹ which symbolized self reliance and emancipation during the freedom struggle in India² has lost its sheen over the years. And there are several reasons for the same. Post 1947, India opted for state led large scale industrialization. With many Indian industrialists setting up huge textile mills, the mass production of fine cloth led to the availability of cloth at lower prices. People began to buy machine made textiles and thus Khadi began losing out to the mill fabric.

In January 1953, the All India Khadi and Village Industries Board was set up to provide employment to thousands of spinners all over India. In 1957, the Khadi and Village Industries Commission (KVIC) was established to take over the work of the board. KVIC was formed as a nodal agency to promote Khadi all over India through its exclusive outlets known as Khadi Bhandars.³ The Government of India (GoI) has ever since continued its support to Khadi. However, there were a few problems. According to designers, the production of Khadi was inconsistent and the cloth was prone to shrinkage and fabric stretch. Besides, fabric colours in khadi were also limited. Red tapism and bureaucracy prevalent in the Indian system, further hampered the growth of the Khadi sector.

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Inspite of having a wide distribution network, there were problems, especially middleman. Corruption was rampant. There were many bogus Khadi units operating in the country, which made it extremely difficult to claim rebates from the Government of India (GoI). KVIC received huge financial assistance from the GoI in the form of subsidies and rebates. In May 2000, the Ministry of Small Scale Industries, announced a special package of Rs.12.16 billion to the industry.

In order to face the challenges of globalization and strengthen its position in the market, KVIC launched two separate brands, Sarvodaya and Khadi in August 2001. Sarvodaya comprised consumer goods like incense sticks, spices, honey, and pickles. The Khadi brand included products like essential oils, herbal oil & soaps, face scrubs, dry fruit honey, designer garments etc. The Khadi brand was introduced exclusively for exports and upmarket. The fabric was being promoted as a fashion fabric. Many high profile fashion designers were roped in to create garments using the fabric. KVIC allotted huge funds into research and development to improve the quality of Khadi. It allotted around Rs. 0.4 billion for promoting the fabric emphasizing its Unique Selling Proposition (USP), eco-friendliness.

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1] Khadi is a cloth produced by interlacement of handspun yarn. The soft twist imparted by the hand gives the yarn 'hairiness' which gives maximum comfort to the wearer. The loom used in weaving of Khadi interlaces the threads in a manner that allows maximum air to permeate to body and soothes the body. Khadi is acknowledged to be one of the coolest and the most comfortable fabric.

2] Instead of exporting raw cotton and importing fine Manchester-made cloth, freedom fighters in India led by Mahatma Gandhi wanted all Indians to spin their own cloth and boycott imports to weaken the British rule in India and make India self-reliant.

3] Khadi Bhandars are exclusive outlets opened by the KVIC to retail all its products.