Effects of Trade liberalisation, Environmental and Labour Regulations on Employment in India’s Organised Textile Sector

Badri Narayanan G.
JEL codes: 
Working Paper Series No. WP-2005-005

In recent years, employment has fallen in the organised textile
sector despite an aggregate rise in output and capital. This paper
analyses the role of various factors that in
uence employment using 3-
digit classication of Indian textile industry from 1973-74 to 1997-98.
Our results document that the fall in employment can be explained in
terms of rise in wages, output shocks, lack of capital utilisation and
trade restrictiveness pertaining to Multi Fibre Arrangement (MFA).
Environmental regulations enhance employment in the sub-sectors that
are most likely to be in
uenced by them. The results are robust to
dierent measures of capital, its utilisation and disaggregation to statelevel.
We also illustrate that in a post-MFA regime, employment in
the sector is bound to increase owing to absence of trade restrictions
and prospects of huge investment in general and in complying with
environmental regulations, though the labour regulations might aect
the magnitude of that increase.