Textile and Apparel Industries

Demonetization and Its Impact on India's Textile and Apparel industry's Comparative Advantage

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Abstract

On November 8, 2016, the Indian government unexpectedly declared a ban on all 500- and 1000-rupee notes ($7.3 and $14.7 respectively). This amounted to the demonetization of 86 percent of the Indian currency in circulation. The demonetization highlighted sharp job losses in small and medium manufacturing enterprises. Labor market statistics showed that up to 3.5 million jobs have been lost during the three months following demonetization while 15 million people have exited the labor force. RCA and its variant normalized revealed comparative advantage (NRCA) is used in this study to measure demonetization’s impact on the textile and apparel competitiveness of India. The results pointed out that though India has a comparative advantage in textile and apparel products, however, India has lost some of its share in the world textile and apparel market due to demonetization. The study shows that there was a significant decline in comparative advantage for Indian apparel and textile products across all HS Codes in 2016, and subsequently in 2017 and 2018.

Keywords: Apparel, Textile, India, Comparative Advantage, Demonetization

How to Cite:

Das, D., (2020) “Demonetization and Its Impact on India's Textile and Apparel industry's Comparative Advantage”, International Textile and Apparel Association Annual Conference Proceedings 77(1). doi: https://doi.org/10.31274/itaa.12065