Introduction The Multi-Fibre Agreement (MFA), that had governed the extent of textile trade betweennations since 19!, ex"ired on 1 #anuar$, !%%&'( )t is ex"ected that, "ost-MFA, mosttariff distortions would graduall$ disa""ear and firms with robust ca"abilities will gain intheglobal tradeof textileanda""arel' The"ri*eis( the+,%bnmar-et whichisex"ected to grow to about +%% bn b$ the $ear !%1% ./0 barel$ five $ears after the ex"ir$of MFA'( An im"ortant 1uestion facing )ndian firms is whether their ca"abilities andtheir diverse supply chainare aligned to benefit from the o"ening u" of global textilemar-et2 The histor$ of textiles in India dates bac- to the use of mordant d$es and "rinting bloc-saround ,%%% 34'(The diversit$ of fibres found in )ndia, intricate weaving on its state-of-art manual looms and its organic d$es attracted bu$ers from all over the world forcenturies'( The3ritishcoloni*ationof)ndiaanditsindustrial "oliciesdestro$edtheinnovative eco-s$stem and left it technologicall$ im"overished')nde"endent )ndia sawthe building u" of textile ca"abilities, diversification of its "roduct base, and itsemergence, once again, as an im"ortant global "la$er'( Toda$, the textile and a""arelsector em"lo$s ,&'% mn "eo"le (and is the !ndlargest em"lo$er), generates 15&thof thetotal ex"ort earnings and contributes 6 "er cent to the 789 thereb$ ma-ing it the largestindustrial sector of the countr$'(This textile econom$ is worth :; +,< bn and its shareof the global mar-et is about &'9% "er cent'( The sector as"ires to grow its revenue to:; +=&bn, its ex"ort value to :; +&%bn and em"lo$ment to 1! million b$ the $ear !%1%(Texmin !%%&)'The Textile and Apparel Supply ChainThe Textile and A""arel ;u""l$ 4hain com"rises diverse raw material sectors, ginningfacilities, s"inning and extrusion "rocesses, "rocessing sector, weaving and -nitting factories and garment (and other stitched and non-stitched) manufacturing that su""l$ anextensive distribution channel (see Figure 1)'(This su""l$ chain is "erha"s one of themost diverseintermsoftherawmaterialsused, technologiesde"lo$edand"roducts"roduced' This su""l$ chain su""lies about agents./?who secure and consolidate orders for "roducers'( @x"orts aretraditionall$ executed through@x"ort Aouses( or "rocurement5commissioningofficesof large global a""arel retailers' )t is estimated that there exist &,%%% garment units in the organizedsector, of whichabout =="ercent areforwovenclothwhiletheremainingarefor-nits'( Aowever,onl$( ,%./06% units are large in si*e (as a result of long $ears of reservation of non-ex"orting garment units for the small scale sectors ./0 a regulation that was removedrecentl$)'(Bhile these firms are s"read all over the countr$, there are clusters emergingintheCational 4a"ital Degion(C4D), Mumbai, 3angalore, Tiru"ur54oimbatore, andEudhiana em"lo$ing about ,'& mn "eo"le'(According to our estimate, the total value of"roduction in the garment sector is around Ds'1,%&%./01,1%% bn of which about =1 "ercent comes from the domestic mar-et'The value of )ndian garments (eg' saree, dhoti,salwar -urta, etc') is around Ds'!%%./0!&% bn'(About 6% "er cent of fabric for garment"roduction is im"orted ./0 a figure that is ex"ected to rise in(coming $ears' The weaving and -nits sector lies at the heart of the industr$' )n !%%6-%&, of the total"roduction from the weaving sector, about 6 "er cent was cotton cloth, 61 "er cent was1%%F non-cotton including -hadi, wool and sil- and 1, "er cent was blended cloth'( Threedistinctivetechnologiesareusedinthesector./0handlooms, "owerloomsand-nitting machines'(The$ also re"resent ver$ distinctive su""l$ chains'(The handloomsector(including -hadi, sil-and some wool) serves thelowand thehigh endsofthevalue chain ./0 both mass consum"tion "roducts for use in rural )ndia as well as niche"roducts for urban G ex"orts mar-ets'( )t "roduces, chiefl$, textiles with geogra"hicalcharacteri*ation (e'g', cotton and sil- sarees in 9ocham"all$ or Haranasi) and in smallbatches'(Aandloom "roduction in !%%,-%6 was around &69, mn's1'meters(of whichabout =! "er cent was using cotton fibre' Aandloom"roduction is mostl$ rural(em"lo$ing about 1% million, mostl$, household weavers) and revolves around master-weavers who "rovide designs, raw material and often the loom' Beaving, using "owerlooms, was traditionall$ done b$ com"osite mills that combined itwith s"inning and "rocessing o"erations'( Iver the $ears, government incentives anddemand for low cost, high volume, standard "roducts (es"eciall$ sarees and gre$ cloth)moved the "roduction towards "owerloom factories and awa$ from com"osite mills (thatwere essentiall$ full line variet$ "roducers)' Bhile some li-e Arvind Mills or Ashimatransformedthemselves intocom"etitiveunits, othersgraduall$closeddown'( ( )n!%%,-%6, there remained !!, com"osite mills that "roduced 16,6 mn' s1' mts' of cloth'( Most of these mills are located in Gujarat and Maharashtra'(Most of the woven clothcomesfromthe"owerlooms(chiefl$at ;urat, 3hiwandi, C4D, 4hennai)'( )n!%%&,there were 6!&,