Stitching competitiveness in the shadows: informality, productivity, and the limits of upgrading in India’s textiles

Abstract

India’s textile industry is a major exporter, but it remains reliant on informal labour. This project shows how labour informality supports cost-based competitiveness by providing flexibility and suppressing wages but also limits long term development through weak productivity growth, limited technological upgrading, and persistently low job quality. Using the global value chain framework, the study explains why export success often coexists with firms remaining stuck in low value-added segments, and how institutional conditions sustain informality as a stable equilibrium. Methodologically, it combines a structured literature review with descriptive evidence on employment composition, firm size distribution, and labour regulation. Finally, it assess whether digital formalisation tools and related policies can shift incentives without excluding vulnerable workers and outlines the conditions for upgrading alongside stronger labour inclusion.