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I
nt. J. Management Concepts and Philosophy, Vol. 8, No
s
. 2/3, 2014 181
Copyright © 2014 Inderscience Enterprises Ltd.
Indian jute manufactures: adaptation and survival
in a ‘sunset’ industry
Amiya Kumar Bagchi
Institute of Development Studies Kolkata,
Monash University,
Calcutta University Alipore Campus,
5th floor, 1 Reformatory Street,
Kolkata 700027, India
E-mail: amiya.bagchi@gmail.com
Panchanan Das*
Department of Economics,
University of Calcutta,
56A, B.T. Road,
Kolkata 700050, India
E-mail: daspanchanan@ymail.com
*Corresponding author
Abstract: The primary motivation of this paper is an inquiry into short-run
efficiency, with factory level data, that can throw light on the reasons for
survival of the jute industry in India. After briefly recapitulating the history of
the rise of the Indian jute industry, and its stagnation in later years, we have
tried to figure out the ways in which technical helped the revival or growth of
the industry, but could not prevent its stagnation in recent years. The structural
change took place in favour of capital that increased profit rate by increasing
workload per worker significantly. Structural breaks took place in skilled-
unskilled employment growth and in wage differentials. In many cases,
workers were increasingly displaced by capital without affecting output growth
of the industry. The study of the post-independence performance of the Indian
jute industry only partially supports the hypothesis that technical advance is the
major driver of creative destruction in industries.
Keywords: jute industry; technology; capitalist enterprises; India.
Reference to this paper should be made as follows: Bagchi, A.K. and
Das, P. (2014) ‘Indian jute manufactures: adaptation and survival in a
‘sunset’ industry’, Int. J. Management Concepts and Philosophy, Vol. 8,
Nos. 2/3, pp.181–195.
Biographical notes: Amiya Kumar Bagchi has been in the profession of
teaching Economics since 1958. He has taught and researched in many
Universities, including the University of Calcutta, Cambridge University,
University of Bristol, Cornell University, Roskilde University, Denmark.
He is the Founder Director of the Institute of Development Studies Kolkata,
and currently at the Institute as Emeritus Professor. He has published many
articles and books.
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. Bagchi and P. Das
Panchanan Das teaches Time Series and Panel Data Econometrics in the
Department of Economics of the University of Calcutta. He has published
several articles on growth, inequality and poverty in referred journals and
edited volume. He is a major contributor of West Bengal Development Report
– 2008, published by Academic Foundation, New Delhi. He has also
contributed to the Routledge volume, Productivity in Indian Manufacturing:
Measurement, Methods and Analysis, 2014.
1 Introduction
Jute may not be a fibre as widely grown, or as well-known as cotton. But in the period of
European and North American industrialisation, it was perhaps the leading packing
material for grain, oilseeds and other bulky materials. In terms of profitability, investment
and growth, worldwide the jute industry probably reached its apogee in the 1920s, and
has been on a path of halting movement, if not decline, especially in the old centres of
manufacture. There are several conceptual frameworks that can be used to explain the
survival of the jute industry in post-independence India even with drastic changes in
packaging, storing and transporting technology. One is the use of a vintage model: as
older vintages of capital equipment are retired, newer and more productive arrays of
capital, embodying new technologies, allow the firms using them to win the competitive
game (Johansen, 1959; Solow, 1960). The second is the Marx-Schumpeter vision of
creative destruction under which the nature of products, production methods, sources of
raw materials, the destinations of products and organisation of the firms change under the
pressure of completion (Schumpeter, 1947). However, the idea that ceaseless search for
innovations and technical progress drives change can be applied to the long-stagnant
industries only with severe modification. Survival within stagnation in the case of an
agro-processing industry such as jute in a developing country depends less on buoyant
animal spirits than on the exploitation of peasant labour and the reserve army of industrial
workers. From the pioneering work of W.E.G. Salter (Salter, 1960) to the studies of
diffusion of industrial processes by an NIESR team (Nabseth and Ray, 1974), it has been
known that in almost every industry best-practice and lower productivity techniques
(and product compositions) co-exist even in advanced capitalist economies. Hence
some degree of push for innovations, resulting in the retiring of obsolete capital goods,
the retention of capital equipment which is obsolete but can still yield a revenue that pays
for the variable cost, and the utilisation of cheap labour can probably be joined together
to explain the survival and rapid fluctuations in the jute industry in India. For explaining
changes in the Indian jute industry since independence. The Marx-Schumpeter vision of
innovative capital and vintage models of change (Stoneman, 1983, Chapter 8) need to be
combined with a realistic appreciation of the role of cheap labour. In pre-independence
days, the annual rate of investment in the industry reached a peak in 1913–1914 and
another peak in 1921–1922 (Bagchi, 1972, Table 8.1), and the number of workers
employed reached a high of 343,868 in 1928–1929, and declined to a low of 257,175 in
1932–1933, and hovered a little below 300,00 for most years of the late 1930s, but
the numbers of looms and spindles went on increasing until 1939–1940 (Bagchi, 1972,
Table 8.3).1 This probably indicates both an increase in the workload of workers, and
intense competition among the mills, since many new mills broke with the Indian Jute
I
ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 183
Mills Association (IJMA) regulations, and profitability of the industry declined
precipitously (Chakrabarty, 1989, Table 2.7).
The Second World War increased the profitability of the industry but prevented any
new investment because of restrictions imposed by the British government on the use
of shipping for any purpose other than that of the war. The Indian jute industry was
badly affected by the partition of India, chiefly because the partition interrupted the
supply of the raw material from East Pakistan, the principal jute-producing region. But
from 1950–1951 again the output grew until 1964–1965. After that year the general
recession in Indian industry, combined with falling exports, affected the output of the
industry. The machinery in many mills was badly worn-out and the money provided by
the government for modernisation was diverted to other uses or remained unutilised.
However, by using more and more casual workers who were badly paid, even in
comparison with the badly-paid permanent workers, and continuing to exploit a situation
when a tightly knit oligopoly confronted several million small and marginal farmers with
no collective ability to resist the manipulations of the mill-owners and traders closely
linked to them, many of the mills made large profits. Sen (1983, p.M46) found that
“The CSO study … unmistakably confirms our broad conclusions that: (1)
productivity of both labour and capital has improved consider- ably; (2) both
fixed and working capital at constant prices have declined considerably over
the period 1971–76. Thus increase in productivity and profitability in the jute
industry has taken place in the face of a steady erosion in the financial position
of the industry. This may explain, in part, industry’s reluctance to invest
money. Such refusal to invest money, while exploiting the jute growers and
workers to a greater extent, may also explain the ‘sickness’ of a number of
units in the industry. The industrial capital seems to have been treated as an
exhaustible asset, such as a mine, by many owners. Something like an
‘industrial involution’ in the sense of a continual increase in the relative (and
perhaps also absolute) surplus value generated by labour has also taken place in
the jute industry.”
Up to 1980 or thereabouts, the proportion of contractual workers to the total number was
below 50%. But among the small proportion of women workers in the mills, it was much
higher:
“While employment of women in the industry in general [was] very small
and also declining, the bulk of the woman labour force [was] employed
as piece-rate workers. For example, in 1981, while only 2.44 per cent of
total employment was accounted for by women, 77 per cent of the women
labourers in jute worked as piece-rate workers and 23 per cent as time raters.”
(Sen, 1983, p.M42)
The contradictions of capitalism become evident as we probe the current conditions and
prospects of the jute industry. Take, for example, the contradiction with environmental
concerns. The principal use of jute, in spite of diversification in its products, is as
packaging material and as carpet backing. The principal competitor of jute in those uses
is polypropylene, which is derived from mineral oil, which is a non-renewable resource
and whose extraction imposes various environmental costs. If we take into account the
cost of replacement, then even with the current prices of oil, it is almost certainly
underpriced. Secondly, polypropylene is biologically non-degradable and hence poses a
major environmental hazard, especially in developing countries with poor sewerage and
public sanitation (Roul, 2009). Yet this material is used in many countries, including
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. Bagchi and P. Das
India, as alternative packaging material because it is cheaper and because the oil lobby is
much stronger politically than the poor jute growers of Bangladesh and India.
By now, the jute mills in India produce a large variety of goods such as hessian,
sacking, carpet-backing cloth, yarn, wearing apparel, and geo-textiles. But hessian,
sacking and yarn still remain the major products. In March 2007, the industry employed
about 76,500 permanent workers and 133,291 other workers. Thus the proportion of
contract workers had gone up enormously since 1980. There were wide variations in the
absolute costs and profitability among the mills. There were also large variations in the
proportions of wage and raw material costs among the mills. In 2007–2008 the
wage share in net expenses ranged from 18.90% to 37.03% in a sample of 34 mills in
West Bengal (the state had 52 functioning mills in that year out of a total of 66 mills for
India as a whole).2 The mills use unskilled or de-skilled labour wastefully because it is so
cheap. At the same time, the lack of proper maintenance of machines and trained
manpower to run the machines leads to frequent breakages and wasteful use of spare
parts, many of which are sub-standard. The technologists trained in the Institute of Jute
Technology look for better career prospects, because employment in jute mills is
regarded as a dirty and dead-end occupation.3
However, even under these unpropitious conditions, it is important to find out the
degree of efficiency with which surviving firms are utilising the inputs available to them.
In fact, survival critically depends on whether a firm can use the inputs available so as to
maximise the value-added whose sharing between labour and capital then is determined
by the respective bargaining power of the owners and the workers. In a sunrise industry,
it is possible for a conglomerate enterprise to support a productive unit that is
unprofitable in the short run. The controlling firm may consider that getting a foot in the
door of the industry is worth temporary loss, and further learning and growth of good will
of the firm will compensate for losses in the short run. A firm cannot have any such
expectation in a sunset industry, and therefore an inquiry into short-run efficiency can
throw light on the survival prospects of the industry. That is a primary motive for
combining the analysis of stagnation and growth for the industry with the analysis of
short-run efficiency.
The case of the jute industry also displays the interesting phenomenon that when
costs have been sunk in capital equipment for a long time and amortised perhaps many
times over, and technologists have acquired industry-specific skills which cannot be
easily transferred to growing sectors, starting and closing down units can be done very
rapidly, without incurring the usual start-up costs. Thus stagnation in an industry can
make capital malleable, with no benefit to labour but yielding easy quasi-rents to capital.
In the rest of the paper we utilise factory level (unit level) data provided by the
Annual Survey of Industries (ASI), the main source of information about the industry
published by the Central Statistical Organization, Government of India. However, there
are problems of both coverage and intertemporal comparability of the ASI data. All firms
registered under sections 2m(i) and 2m(ii) of the Factories Act 1948 are supposed to
supply relevant information mentioned in the ASI schedules; but many of them have
failed to supply them frequently. Hence in any given year there may be a larger number
of factories than is reported by the ASI.
The ASI distinguishes between the census sector which corresponds to the larger
units, and the sample sector which consists of units below the size that qualifies a factory
as a member of the census sector. The coverage of the factory units in ASI under census
sector was changed in 1997–1998. Previously, factories employing 100 or more workers
I
ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 185
were included in the census sector and the rest in the sample sector, but since 1997–1998
factories employing 200 or more workers have been covered on census basis and the
remaining factories on sample basis. Also, all public sector undertakings (PSUs),
irrespective of the numbers of their employees were included in the census sector. The
rest were covered in the Sample Sector by the usual formula of determination of sample
size at a given value of the precision of the estimates with at least 99% chance. As a
result, for any industry one finds a smaller number of units in the census sector since
1997–1998. It leads to a bias in the results on size distribution, ownership pattern and
forms of business organisation. The size distribution in terms of fixed capital of the
reported units is highly positively skewed (the coefficient of skewness varies from 2.1 in
1996 to 7.9 in 1979), the share of firms with average capital more than the median value
is significantly large.
To maintain the meaningful comparison between units of classification as provided in
national industrial classification (NIC) used in ASI over time, we have used factory level
data over the period 2000–2001 to 2009–2010.4 The study is organised as follows.
Section 2 describes the locational and ownership structure of Indian jute mills. Here, we
have looked at the change in the distribution of factory units across the major states in
India during the past decade. Section 3 examines growth and structural changes in
different sectors of jute manufacturing in India as defined in ASI in terms of NIC
categories for different periods. The employment structure of the industry has also been
examined in this section. Contributions of different inputs to output in jute manufacturing
sectors are explored by estimating the neo classical production function in log-linear form
in Section 4. Section 5 describes production and consumption of different types of jute
products on the basis of the data taken from the Ministry of Textiles, government of
India. Section 7 concludes.
2 Location and organisational structure
The jute industry in India is concentrated in West Bengal, mainly on the banks of the
Hooghly near Kolkata. The state has enjoyed a cost advantage in producing jute goods
since the initial establishment of the industry in India in the middle of the 19th century5
as the major competitor to the linen and jute industry of Dundee. Kolkata is located in
close proximity to the jute growing districts of West Bengal. Jute cultivation expanded in
Bengal more than one and a half century back when the Dundee flax mills were
converted into jute processing mills, raising the global demand for jute manifold. Bengali
peasants were highly experienced in jute cultivation and responded quickly to meet this
increased demand. West Bengal, today, contributes roughly three-fourths of the total raw
jute output of the country.
Table 1 displays the distribution of factory units under the spinning and weaving
sector of jute manufacturing by location in India for 2000–2001 and 2009–2010.6
In 2000–2001 spinning and weaving sector covered nearly 90% of the total jute
manufacturing units at the national level, but its share declined to 75% in 2009–2010.
The figures as shown in Table 1 indicate the dominance of West Bengal in terms of the
number of factory units in this sector during the past decade. While the number of factory
units of the state declined, its share to national figure increased significantly during the
period 2000–2001 to 2009–2010. This implies that the number of jute mills, particularly
in the spinning and weaving sector, declined everywhere in the country mostly in the
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form of lockouts, but at a higher rate in the states outside West Bengal during the first
decade in the 21st century. Gujarat registered a sharp fall in jute manufacturing units in
this sector. Other major declining states include Andhra Pradesh, Maharashtra and
Kerala. Tamil Nadu, on the other hand, had shown a significant improvement both in
terms of the number of factory units as well as its share. Orissa also showed a similar
trend. In Punjab the number of factory units declined, but its national share increased
during this period.
Although the spatial distribution of factory units in other sectors of jute
manufacturing in India is not shown in tabular form in this study, the data reveal that the
manufacture of finished jute fabrics is located mainly in West Bengal, and its number
declined during the past decade. The number of factory units of jute carpets, concentrated
in Kerala, experienced no significant trend in either direction during that period. The
manufacture of rope and cordage, on the other hand, mostly located in Andhra Pradesh
and exhibited rising trend significantly during 2000–2010.
Table 1 No. of spinning and weaving units of jute manufacturing by major states in India
States 2000–2001 2009–2010
Andhra Pradesh 21 (6) 7 (4)
Assam 16 (5) 5 (3)
Bihar 3 (1) 2 (1)
Chhattisgarh 4 (1) 1 (1)
Gujarat 17 (5) 2 (1)
Haryana 18 (5) 8 (4)
Himachal Pradesh 3 (1) 4 (2)
Jharkhand 6 (2) 3 (2)
Karnataka 11 (3) 4 (2)
Kerala 36 (10) 5 (3)
Madhya Pradesh 14 (4) 4 (2)
Maharashtra 24 (7) 7 (4)
Orissa 2 (1) 3 (2)
Punjab 12 (3) 9 (5)
Rajasthan 17 (5) 7 (4)
Tamil Nadu 34 (10) 37 (21)
Uttar Pradesh 18 (5) 5 (3)
West Bengal 72 (21) 59 (33)
All India 349 (100) 179 (100)
Figures in parentheses indicate state’s share in percentage. As we have taken major states
only, column sum does not match with all India figure.
Source: Authors’ estimation with the factory level data, Annual Survey of
Industries, CSO, Ministry of Statistics and Programme
Implementation, Government of India
Table 2 presents the distribution of factory units of the four sectors, as stated above, of
jute manufacturing together, by organisation and ownership types, across four major
I
ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 187
Indian states in 2009–2010. Over 80% of the jute mills in West Bengal were operated by
public limited companies. The respective shares of public limited companies in jute
manufacturing in Andhra Pradesh, Tamil Nadu and Kerala were notably low in that
period. The organisation type of jute mills in Andhra Pradesh and Kerala were dominated
by private limited companies. Jute mills in India are mostly under private ownership, but
the ownership pattern, as of 2009–2010, was not similar in different states (Table 2).
In Andhra Pradesh, the jute mills, producing mainly rope and cordage, were fully
privately owned. In Tamil Nadu also all jute mills were under private ownership.
In West Bengal 98% of the jute mills were privately owned. In Kerala the share of state-
owned mills, mainly producing jute carpets, was around 35%.
Table 2 Percentage distribution of jute mills by types of organisation and ownership:
2009–2010
Organisation type Ownership type
Public limited
company
Private limited
company
State
ownership
Private
ownership
Andhra Pradesh 25 50 0 100
Kerala 9 39 35* 65
Tamil Nadu 15 17 0 100
West Bengal 82 16 2 98
* includes ownership wholly by the Central government (5%), by the state government
(17%) and by joint public sector (13%).
Source: As for Table 1
3 Growth and structural changes: 2000–2010
After one decade of reforms in industrial policies, as a part of the Fund-Bank structural
adjustment programme initiated by the Union government, the annual growth rates of
gross output and physical capital (all in real terms at 2004–2005 prices), employment and
real emoluments in different sectors of the jute industry in India were highly uneven over
the years (Figure 1). Because of their irregular fluctuations over the period of 10 years in
this study as shown in Figure 1, it would be inappropriate to calculate growth rates of
output and input variables by fitting a trend curve. However, if we look closely at the
time path of their logarithmic values, we have some idea about the growth pattern of
output, labour and capital experienced recently by jute manufacturing units in the
country. In the spinning and weaving sector of jute industry, output increased sharply in
2002, after experiencing a drastic fall in the previous year. Output in this sector was
roughly stable in the next two or three years; again after 2006 it showed a sharp upward
trend.
The other sectors also followed roughly a similar pattern in output changes.
Investment in plant and machinery declined during the first half of the previous decade,
but it increased thereafter in the spinning and weaving jute textiles sector. In the
manufactures of jute fabrics and jute carpets, however, there was no significant increase
in the number of machines during this period. Employment of labour in jute mills
increased, but at a significantly lower rate. The rate of absorption was higher in spinning
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. Bagchi and P. Das
and weaving of jute, as compared to other sectors of the industry for obvious reasons.
While the absorption rate was fluctuating during the first part of the previous decade, the
rate of employment of total labour (skilled and unskilled taken together) increased at a
steeper rate, particularly in spinning and finishing of jute fabrics during the second half of
that decade. There had been no significant increase in labour employment particularly in
the manufacture of jute carpets and ropes during this period. The growth pattern of real
emoluments was roughly the same for all employees, implying simply that the rate of
payment did not improve in this industry (the pay structure had been changed in other
sectors, particularly in public sector jobs and in other corporate sectors during that period
because of the implementation of the 6th Pay Commission appointed by the Union
government). In many cases jute industry workers were tactfully forced to leave their job,
or to accept early retirement with or without compensation.
Figure 1 Time path of output, physical capital, labour and emoluments (see online version
for colours)
Output, capital and emoluments are in lakh rupees at 2004–2005 prices.
Source: As for Table 1
The changes in structural ratios of the jute industry in India are presented in Table 3. The
structural change that took place was in favour of capital and increased the profitability of
the jute industry during 2000–2010 by following the trend in earlier period (Das, 2014).
The profitability reached a peak in the mid-1980s and after a sharp decline, it experienced
an increasing trend again since the late 1980s. But the profits of the industry were
siphoned off to other business, largely through illegal raw jute purchase operations. If we
add the profits of the raw jute trade that are accrued to the jute mill-owners, the rate of
profit for the jute industry would appear to be much higher. The rate of return on capital
and value added per unit of output also moved up from the late 1980s. Capital intensity
increased in the spinning and weaving sector as well as in the manufacture of jute carpets
I
ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 189
during 2000–2010 (Table 3). The industry became more capital-intensive not simply
because of higher investment in plants and machinery but because of the gradual
displacement of workers. The manufacture of jute ropes and cordages, and finishing of
jute fabrics, however, experienced a fall in capital-labour ratio during the same period.
During the past decade, in the spinning and weaving sector of the industry, output per
unit of labour increased significantly and at a higher rate than the rate of increase in
output per unit of capital. In the manufacture of finished jute fabrics, both the ratios of
output to labour and capital increased, but, in contrast to the spinning sector, output-
capital ratio increased at a significantly higher rate as compared to the output-labour
ratio. The structural changes in these two sectors of the jute industry increased workload
per worker significantly. In the manufacture of jute carpets, on the other hand, both the
ratios of output to labour and capital declined and the former ratio at a significantly
higher rate. In the manufacture of jute ropes and cordages, output-labour ratio declined,
but output-capital ratio improved by more than three times during 2000–2010.
Table 3 Structural ratios in the Indian jute industry
Structural ratios
Spinning and
weaving of jute
Finishing of jute
fabrics
Manufacture of
jute carpets
Manufacture of
jute ropes and
cordages
2000–
2001
2009–
2010
2000–
2001
2009–
2010
2000–
2001
2009–
2010
2000–
2001
2009–
2010
Output per unit of
labour
4.6 7.8 0.4 2.5 32.7 9.8 2.7 2.5
Output per unit of
capital
3.8 5.8 0.3 5.9 11.7 5.8 6.0 18.8
Capital-labour ratio 1.2 1.3 1.4 0.4 0.3 1.7 0.4 0.1
Source: As for Table 1
We have mentioned that jute mills in India use unskilled labour wastefully because it is
so cheap. At the same time, technical persons employed in jute mills have come to regard
their work as a dead-end occupation. Structural breaks took place in skilled-unskilled
employment growth and in wage differentials. Both wage and employment experiences
of skilled workers indicate that they had become confined to a blind alley, and there
was little incentive for undergoing formal training in jute technology. Over 90% of
employees were ordinary workers in spinning and weaving in 2000–2001 and the share
declined to less than 80% in 2009–2010. But in other sectors of jute manufacturing the
share of workers of this type increased remarkably (Table 4). The relative share of
ordinary workers increased at the highest rate in the manufacture of jute carpets during
the period 2000–2010. Feminisation of workforce had occurred clearly in jute textile
industry in India. The share of women workers increased significantly in the spinning
sector during this period. However, the women’s share declined in the manufacture of
jute carpets, and ropes and cordages. The manufacture of jute carpets was performed
mainly by contractual workers on a casual basis: a considerable part of them were women
workers.
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Table 4 Percentage of workers of different types in jute industry
Workers’ type
Spinning and
weaving of jute
Finishing of jute
fabrics
M
anufacture of jute
carpets
M
anufacture of jute
ropes and cordages
2000–
2001
2009–
2010
2000–
2001
2009–
2010
2000–
2001
2009–
2010
2000–
2001
2009–
2010
Ordinary worker 92.6 78.6 72.2 91.3 55.2 81.0 89.7 95.0
Female worker 5.4 26.1 2.1 3.5 25.0 21.0 24.8 2.0
Contact worker 8.6 18.7 – 6.8 68.8 64.2 7.8 14.8
Source: As for Table 1
4 Relative contributions of inputs to output
During 2000–2010, the productivity of both labour and capital increased, but at different
rates in different sectors of the jute industry. The rate of increase of capital productivity
was significantly higher in jute fabrics, and ropes and cordages as compared to spinning
and weaving. On the other hand, labour productivity grew more than capital productivity
in spinning and weaving sector in jute industry in India. In many cases, workers were
increasingly displaced by capital without affecting output growth of the industry.
Although labour productivity increased at a considerable rate, wage discrimination was
very high between different types of workers performing roughly similar kinds of work.
The contractual workers and female workers were paid less than half of the wages of
permanent male workers. The contract workers were paid on a piece-rate basis and their
earnings were affected badly by the disruption of production due to power cuts or
mechanical faults that were beyond the control of the jute workers.
In this part of the study we have estimated the contributions of labour, capital and
materials used to output of different types of jute manufacturing, as classified by the
ASI as we have mentioned earlier, by utilising factory level information for the year
2009–2010. The Cobb-Douglas production function has many limitations (Hall, 1988).
However, in a microeconomic context, it can be used as a summary measure of the way
output changes as inputs of the major factors of production change. Here a Cobb-Douglas
production function is estimated with three inputs, labour, capital and materials, and
ex-factory value of products and by-products as output variable, all in logarithmic form,
by applying ordinary least squares for the period 2009–2010. The production function is
specified as
ln ln ln ln
iLikiMii
YA L K Mu
ββ β
=+ + + + (1)
The variables Yi, Li, Ki and Mi represent output, labour, capital and material respectively
of firm i, and ui is the idiosyncratic random error, capturing all other unobserved factors.
The use of unit level data across regions captures technological heterogeneity among
firms. We have used the ex-factory value of output as output variable, and the value of
plant and machinery, and total number of employees as input variables capital and labour
respectively. The coefficients βL, βK and βM measure the input elasticities in terms of
labour, capital and material respectively representing marginal contributions of them. The
sum of the elasticities measures the returns to scale. The intercept component ‘A’ gives
I
ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 191
an idea about the effect of other observable factors not incorporated in the estimated
model.
Table 5 presents the estimated input elasticities in different segments of jute
manufacturing units at the national level, and Table 6 displays the respective estimates
for spinning and weaving of jute, the dominating sector in the aggregate Indian jute
industry as well as in the states of West Bengal and Tamil Nadu. The contribution of
labour was significantly higher than that of capital and materials in every sector of
jute manufacturing in India (Table 5). Workers’ contribution was the highest in the
manufacture of ropes and cordages, while capital’s contribution was the highest in
spinning and weaving as compared to other sectors of jute manufacturing in 2009–2010.
In the manufacture of jute carpets, on the other hand, the contribution of materials was
the highest and the contribution of capital was statistically insignificant. As the sum of
input elasticities is less than unity, the production function specified here exhibited
diminishing returns to scale in each sector of the industry.
The spinning and weaving of jute manufacturing units have been concentrated mainly
in West Bengal, followed by Tamil Nadu. The technological characteristics as revealed in
the estimated values of input elasticities were different in these two states. While the
contribution of capital to output in the weaving sector was the same, the contribution of
labour was significantly higher in Tamil Nadu than in West Bengal (Table 6). Our
estimated results suggest that the spinning sector of jute exhibited increasing returns to
scale in Tamil Nadu, while it followed diminishing returns to scale in West Bengal. This
is really because the industry suffered from excess capacity and the estimate cannot be
seen as proof of economies of scale in the proper sense.
A major technological change in the jute industry in India took place in the 1950s
when sliver spinning replaced spinning from twisted roving. Since then sadly enough,
unlike in the case of cotton and synthetic textiles, there has been very little effort to
innovate and develop exclusive jute machinery in the country. Mill owners remain
reluctant to modernise their plants. In the early 1990s some initiatives had been taken to
improve jute machinery in India under a UNDP project. But this resulted mainly in the
import of carding machines, shuttle looms and winders designed for jute in the 1960s and
1970s in the UK. Much of the jute machinery operating in India is still very old, some of
the machines even date from the 1930s.
Table 5 Estimated coefficients of labour, capital and material inputs in different sectors of jute
industry: 2009–2010
Spinning and
weaving of jute
Manufacture of jute
carpets
Manufacture of jute
ropes and cordages
Intercept 8.28* 7.03* 10.74*
Labour 0.41* 0.34 0.75*
Capital 0.27* –0.10 0.04
Material 0.24* 0.70** 0.18
R2 0.923 0.726 0.898
Adj. R2 0.922 0.681 0.887
*Significant at less than 1% level.
**Significant at 5% level, and the rest are statistically insignificant.
Source: As for Table 1
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Table 6 Estimated coefficients of labour, capital and material inputs to output in spinning and
weaving of jute: 2009–2010
West Bengal Tamil Nadu
Intercept 12.00* 9.68*
Labour 0.70* 0.84*
Capital 0.13* 0.13*
Material 0.04 0.15*
R2 0.804 0.967
Adj. R2 0.793 0.963
*Significant at less than 1% level.
**Significant at 5% level, and the rest are statistically insignificant.
Source: As for Table 1
5 Production and consumption of jute products
The principal use of jute, in spite of diversification in its products, is as packaging
materials and as carpet backing (Table 7). Among the traditional products, hessian and
sacking comprised of 18% and over 65% respectively of the total product in 2008–2009.
While the share of Hessian declined between 1999 and 2009, the production share of
sacking increased. Jute sacks have been very popular because of its mechanical strength,
resistance to heat and light, air ventilation, biodegradability and so on.
Table 7 Types of jute goods produced (as percentage of total value of output)
Period Hessian Sacking Others
1999–2000 21.7 57.2 21.2
2000–2001 20.8 58.6 20.6
2001–2002 17.2 64.6 18.2
2002–2003 20.9 61.7 17.5
2003–2004 19.4 62.3 18.3
2004–2005 19.2 61.5 19.3
2005–2006 20.2 63.7 16.1
2006–2007 18.5 64.5 17.1
2007–2008 19.7 64.4 15.9
2008–2009 18.2 65.6 16.2
Source: Office of the Jute Commissioner, Ministry of Textiles,
Government of India
The Indian jute industry has faced new kinds of competition in recent years, but
survived, and grew slowly, primarily on the basis of domestic consumption (Table 8).
In 2008–2009, roughly 12% of the total value of jute goods was exported from India.
After the First World War, in 1919, the Calcutta Hessian Exchange Ltd. Was established,
and futures markets grew in both raw jute and jute products. The fall in demand for jute
fabrics was often blamed on the operations of these future markets (Bagchi, 1972, p.278).
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ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 193
In 1927, the East Indian Jute Association Ltd. was set up for organising futures trading in
raw Jute. These two associations amalgamated in 1945 to form the East India Jute &
Hessian Ltd. under which trading in both raw jute and jute goods is organised. However,
futures trading in raw jute was suspended in 1964.
Table 8 Domestic consumption of jute goods (percentage to total production)
Period Hessian Sacking Total
1999–2000 83.3 99.8 89.7
2000–2001 79.8 98.1 88.3
2001–2002 88.3 98.7 91.2
2002–2003 74.3 95.5 84.8
2003–2004 83.0 92.9 85.5
2004–2005 78.9 98.0 86.4
2005–2006 74.2 96.7 87.1
2006–2007 83.5 97.7 89.7
2007–2008 77.5 96.4 86.9
2008–2009 83.9 97.3 87.9
Source: As for Table 7
6 Conclusions
Schumpeter (1947) hypothesised that technical advance is the major driver of creative
destruction in industries. The study of the post-independence performance of the Indian
jute industry only partially supports that hypothesis. After briefly recapitulating the
history of the rise of the Indian jute industry, and its stagnation in later years, we have
tried to figure out the ways in which technical change (along with growth of the domestic
market) helped the revival or growth of the industry, but could not prevent its stagnation
in recent years. Although, apparently, the approaches of Schumpeter (1947), the vintage-
capital approaches of Johansen (1959) and Solow (1960) and the frictional co-existence
of best-practice and inferior technologies approach of Salter (1960) are contradictory,
they can be reconciled by examining different phases of evolution of the post-
independence jute industry in India. Diversification of products and the adoption of new
products from the late 1970s and 1980s allowed some big firms to overcome the fall in
productivity and increase their market share. This also involved the installation of new
vintages of capital. But the emergence of a pool of skilled workers when the industry fell
on harder times in the 1990s and the resort to cruder forms of products by smaller and
less dynamic firms allowed many of them to survive by operating their factories in
seasons when greater profitability beckoned.
We have looked into the nature of technical adaptation of the industry by carrying out
an empirical estimation of some quantitative indicators of growth and structural changes
with firm level ASI data to illustrate the process of growth, stagnation and survival of jute
textile industry in India after one decade of structural adjustment reforms. A significant
mismatch between labour and capital in terms of their relative contribution to output has
been observed. The industry experienced a fall in factor productivities and technical
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efficiency during the 1980s, but survived somehow during the post reform period (Das,
2014).
The real capital growth was extremely low; both fixed and working capital even
declined during the 1970s (Sen, 1983). This trend followed the general recessionary trend
that started in Indian industries in the mid-1960s. However, productivity and profitability
increased substantially, in spite of systematic erosion of capital stock. Since the late
1970s, however, fixed capital in jute industry grew at a substantial rate and structural
changes took place in favour of capital. While productivity and efficiency declined in the
1980s, they increased in the 1990s and afterwards. The industry’s capital stock is made
up of machines of different ages with different productive potentials. Many of the
machines dated back more than 50 years; new investment took place, propelled by
growth in domestic use of jute products, but this incremental production took place
without using machines of the latest type. Workers were displaced in the process of
structural change, but technological diffusion in the form of use of more recent
technologies did not occur by. The contribution of labour to output growth was
significantly higher than that of capital. This was achieved partly by increasing the
workload of the ordinary workers without technological up-gradation of machinery.
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ndian jute manufactures: adaptation and survival in a ‘sunset’ industry 195
Notes
1S.G. Barker, Director of Research, Wool Industries Research Association, report summarised in
Bagchi (1972), pp.288–289.
2Source: Report of the Sub-committee on “Analysis of wage structure in the context of costing of
various items of expenditure and profitability of jute mills (mimeo) set up” by the Ministry of
Labour & Employment, Government of India on 28th January, 2009.
3Report on study demand (sic) for skills and improvement of skill levels of workers in jute industry
for enhanced productivity(mimeo) [the committee was set up on 19 December, 2008].
4NIC 1998, NIC 2004 and NIC 2008 are perfectly comparable. The latest unit level data we have
for the period 2009–2010.
5The first jute mill was established at Rishra, near Calcutta, in 1855 by George Ackland by
importing jute spinning machinery from Dundee.
6According to NIC08 used in ASI, jute manufacturing units are classified into four main categories:
spinning and weaving, finishing of jute fabrics, manufacture of carpets, and manufacture of rope
and cordage.