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Importance of the Handicraft Industry

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Any opinions, findings, conclusions or recommendations expressed in this material are those of the authors and do not necessarily reflect the views of UK Essays.

Published: Mon, 11 Dec 2017

Introduction

Handicrafts are unique expressions and represent a culture, tradition and heritage of a country. The Handicraft Industry is one of the important productive sector. Various attempts have been made to define this broad and diversified industry. The following definition strives to cover diversity and complexity of Handicraft Industry.

Defining Handicrafts:

Definition According to United Nations Educational, Scientific and Cultural Organization/Information Technology Community (UNESCO/ITC) International Symposium on “Crafts and the International Market: Trade and Customs Codification”, Manila, Philippines, October 1997:

        “Products which are produced either completely by hand or with the help of tools. Mechanical tools may be used as long as the direct manual contribution of the artisan remains the most substantial component of the finished product. Handicrafts are made from raw materials and can be produced in unlimited numbers. Such products can be utilitarian, aesthetic, artistic, creative, culturally attached, decorative, functional, traditional, religiously and socially symbolic and significant”.

Definition according to Govt. of India:

“Product which is made by hand; should have some artistic value; they may or may not have functional utility.”

The Importance of Handicrafts

  • The Cultural Importance: Handicrafts play very important role in representing the culture and traditions of any country or region. Handicrafts are a substantial medium to preserve of rich traditional art, heritage and culture, traditional skills and talents which are associated with people’s lifestyle and history.
  • The Economic Importance: Handicrafts are hugely important in terms of economic development. They provide ample opportunities for employment even with low capital investments and become a prominent medium for foreign earnings
  • India is a country of rich culture, history and traditions. India is one of the major producer and supplier of Handicrafts products in the world. India has been major producer and supplier of handicrafts products since very long time. Before the industrial development, this art and industry was a potential economic advantage for the country.
  • During recent years, the importance of handicrafts has been surged due to their cultural and financial values. The small scale industries – including handicrafts can play a major role in the development of the economy of both developed and the developing countries equally. The 90-95% of the total industrial products of the world are produced in small workshops run by less than 100 people. For instance, Japan, which is at the peak of the economic development, has considered 84% of the its industries as small and medium scale industries. In countries such as India and China, handicrafts are as high as the mechanized products in quality and volume, and are a major source of their foreign earnings. These countries are focusing on the development of handicraft industry, in order to strengthen the economy.
  • The Indian handicrafts industry is highly labor intensive, cottage based and decentralized industry. The industry is spread all over the country mainly in rural and urban areas. Most of the manufacturing units are located in rural and small towns, and there is huge market potential in all Indian cities and abroad. Handicraft industry is a major source of income for rural communities employing over six million artisans including a large number of women and people belonging to the weaker sections of the society.
  • The Handicraft sector is highly creative sector and produces large variety of crafts products. This industry is localized segment of the domestic and international market. In India the production of craft products are done on both large and small scale. Because of low capital investment people can start their business on small scale. Through this flexibility the demand and supply can be managed.
  • Though Indian Handicraft industry is considered a cottage industry, but it has evolved as one of the major revenue generator over the years. There has been consistent growth of 15% over few years and the industry has evolved as one of the major contributor for export and foreign revenue generation.
  • There is huge demand for the Indian Handicraft products in both national and international market. To match the demand and supply with quality, there is need to have greater technological support and innovativeness with the uniqueness in industry.

Key Facts Of Indian Handicrafts Industry

  • India’s rich cultural diversity and heritage provides a unique and huge resource for developing craft products.
  • The Indian Handicraft Industry is showing continuous growth rate of 20% every year.
  • Handicrafts industry is one of the important segment of decentralized sector in India.
  • Major parts of industry operates in rural and semi urban areas throughout the country and has potential Indian and International market with around 67000 exporters to tap the market.
  • According to the national census of handicrafts, undertaken by the National Council for Applied Economic Research the value of handicrafts produced last year were of Rs.26,213 Crore.
  • This Industry provides huge employment opportunities to artisans that include women and people belonging to backward and weaker society. This is one of the major source of income there.
  • The Indian Handicraft Industry is a $100 billion industry worldwide.
  • India’s contribution in world market is 1.2%
  • The total exports of crafts items: – Rs. 13412.92 Crore.
  • Industry’s share in India’s exports:- 1.51 %
  • In spite of having diversified products, some part of Indian market are still untapped and market is price sensitive. Products are high priced in big and metro cities, which are beyond, reach of people belonging middle and lower middle class.
  • Craft producers have to compete on price, quality and delivery for different segments.
  • There is poor promotion for craft products in national market.
  • There is lack of awareness about new traditions and among craftsmen and there is need of technological support and training.

Classification

Handicrafts industry comprises diversified products portfolio and there is large variety available in market. Handicrafts products can be distinguished into following:

  • Metal ware,
  • Wood ware,
  • Hand printed textiles,
  • Embroidered and crocheted goods,
  • Shawls, Carpets,
  • Bamboo products
  • Zari goods,
  • Imitation jewellery
  • Paintings,
  • Earthenware,
  • Jute products,
  • Marble Sculpture,
  • Bronze Sculpture
  • Leather Products and
  • other miscellaneous handicrafts.

Handicraft industry in India is spread throughout the country with greater concentration in rural and suburban areas of country.

  • Metal ware and Bronze sculpture: Major Manufacturing units are located in Moradabad, Sambhal, Aligarh, Jodhpur, Jaipur, Delhi, Thanjavur, Jagadhari etc.
  • Wooden artware and sculpture: Major Manufacturing units are located in Sharanpur, Nagina, Hoshiarpur, Srinagar, Amritsar, Jaipur, Jodhpur, Bangalore, Mysore, Behrampur etc.
  • Embroidered item: Manufacturing Units are located in Kutch, Jaisalmer, Baroda, Lucknow, Jodhpur, Agra, Amritsar, Kullu and Srinagar.
  • Marble and soft stones crafts:Agra, Madras, Bastar and Jodhpur are famous for these craft products.
  • Paper Crafts: These manufacturing units are located in places of Kashmir and Jaipur.
  • Terracotta: Terracotta units are located in state of Madhya Pradesh, Rajasthan, and Bastar.
  • Hand printed textiles and scarves:Amroha, Jodhpur, Jaipur, Farrukhabad, Bagru and Sanganer consist of manufacturing units.
  • Zari Products: Zari and zari products are manufactured at units located at Surat, Agra, Varanasi and Amritsar.
  • Imitation Jewelry: Parts of Delhi, Moradabad, Sambhal, Jaipur and Kohima consist of manufacturing units for these jewelry products.

Political View

Industrial Policy:

  • There are no restrictions regarding location for establishing manufacturing units.
  • All producers of handicrafts are exempt from obtaining Industrial License to manufacture. The delicenced undertakings, however, are required to file an Industrial Entrepreneur Memoranda (IEM) in Part ‘A’ with the Secretariat of Industrial Assistance (SIA), and obtain an acknowledgment. No further approval is required.

Trade Policy:

  • Handicraft products fall under the ITC (HS) code 97.
  • Paintings, drawings and paintings, domestic articles of wood etc. which come under 9701
  • Original engravings falling under 9702
  • Original sculptures categorized under 9703
  • Products under the code 9704 are freely importable.
  • Imports of items in 9705 are restricted.

Characteristics of Indian Handicrafts for exports; as defined by Govt. of India are:

  • They are quota free and neutral to fiber content or composition, barring 100% silk.
  • They include Garments, Made-up and clothing accessories.
  • Are produced in cottage industries.
  • Should not have zippers.
  • Must be ornamented using any one or more of the following Indian folk styles.
  • Hand painting, Hand printing, Batik, Tie and Dye, Kalamkari.
  • Hand embroidery, Crocheting.
  • Appliqué work of sequins, wooden or glass beads, shells, mirror, ornamental motifs of textiles materials.
  • Extra wrap of welt ornamentation of silk, art silk or zari threads.
  • Should conform to shape and styles of each item as defined in the agreed list of different countries.
  • Should satisfy the dimensional aspects.

Tariff-non-tariff Policy: Except for 9704, all the items under 97 attract a total import duty of 35.2 per cent. This includes a basic duty of 35 per cent and a special additional duty of four per cent. Items under 9704 do not attract any import duty.

In India, handicrafts are distributed through following major Distribution Channels:

  • Retailers/Direct Sales: This is the most common distribution channel for selling handicrafts in India. In India there are large number of retailers who provides wide range of handicrafts products.
  • Wholesalers/Distributors: Apart from retail and direct sales channels, wholesalers and distributors also provide large range of handicraft products. Wholesalers can keep product stock in bulk and can sell direct to final consumer or retailer.
  • E-Commerce: Internet has emerged as a one of the promising distribution channel for selling the handicrafts products. It is estimated that internet will be one of the major channel for the distribution of handicrafts products through E-Commerce.

Export And Foreign Earnings

Handicraft Industry has evolved as one of the major contributors for Export and foreign earnings:

  • Exports of handicrafts including hand knitted carpets during 2005-06 were Rs.13412.92 Crore.
  • Export items- Art Metal wares, Wood wares, Hand printed textiles, Embroidered and Crocheted goods, Shawls as art wares, Zari goods, Imitation jewelry, Carpets, Leather products, Jute products, Paintings, Bamboo products, Earthen ware, Marble Sculpture, Bronze Sculpture etc.
  • India’s major export markets are USA, Germany, UK, France and Japan, Saudi Arabia, Canada, and Italy etc.

Indian Handicraft Industry contributes very important role in Indian economy. For the proper functioning and operation of industry it is very essential to have some policies and regulation in place. In India, the Ministry Of Textile is responsible for the formulation of policy, planning, development, export promotion and regulation of the Handicraft Industry. There are several other bodies and organizations which help to formulate and execute these policies. All policies should be implemented for the greater development of the whole industry so that it can help to strengthen the economy.

Industrial Policy:

  • There are no restrictions regarding location for establishing manufacturing units.
  • All producers of handicrafts are exempt from obtaining Industrial License to manufacture. The delicenced undertakings, however, are required to file an Industrial Entrepreneur Memoranda (IEM) in Part ‘A’ with the Secretariat of Industrial Assistance (SIA), and obtain an acknowledgment. No further approval is required.

Trade Policy:

  • Handicraft products fall under the ITC (HS) code 97.
  • Paintings, drawings and paintings, domestic articles of wood etc. which come under 9701
  • Original engravings falling under 9702
  • Original sculptures categorized under 9703
  • Products under the code 9704 are freely importable.
  • Imports of items in 9705 are restricted.

Characteristics of Indian Handicrafts for exports; as defined by Govt. of India are:

  • They are quota free and neutral to fiber content or composition, barring 100% silk.
  • They include Garments, Made-up and clothing accessories.
  • Are produced in cottage industries.
  • Should not have zippers.
  • Must be ornamented using any one or more of the following Indian folk styles.
  • Hand painting, Hand printing, Batik, Tie and Dye, Kalamkari.
  • Hand embroidery, Crocheting.
  • Appliqué work of sequins, wooden or glass beads, shells, mirror, ornamental motifs of textiles materials.
  • Extra wrap of welt ornamentation of silk, art silk or zari threads.
  • Should conform to shape and styles of each item as defined in the agreed list of different countries.
  • Should satisfy the dimensional aspects.

Tariff-non-tariff Policy: Except for 9704, all the items under 97 attract a total import duty of 35.2 per cent. This includes a basic duty of 35 per cent and a special additional duty of four per cent. Items under 9704 do not attract any import duty.

In India, handicrafts are distributed through following major Distribution Channels:

  • Retailers/Direct Sales: This is the most common distribution channel for selling handicrafts in India. In India there are large number of retailers who provides wide range of handicrafts products.
  • Wholesalers/Distributors: Apart from retail and direct sales channels, wholesalers and distributors also provide large range of handicraft products. Wholesalers can keep product stock in bulk and can sell direct to final consumer or retailer.
  • E-Commerce: Internet has emerged as a one of the promising distribution channel for selling the handicrafts products. It is estimated that internet will be one of the major channel for the distribution of handicrafts products through E-Commerce.

Easily availability on global basis and cost effective way has made Internet a good marketplace to buy, sell, and promote the products.

Strengths:

  • Large, diversified and potential market.
  • There is large product variety and range is available because of diversified culture.
  • It has strong, diversified and supportive retail infrastructure.
  • Diversified product range that service different market.
  • Cheap labor rates that result to competitive price.
  • Need low capital investment.
  • There is flexible production flexibility.
  • Low barriers of new entry.

Advantages and Critical Success Factors:

  • Easy creation and development of production centers.
  • There is no need for macro-investment.
  • Industry provides potential sources of employment.
  • Products are high value added, and handicrafts have various applications.
  • It is the potential source of foreign revenue because of higher export.

Weaknesses:

  • Lack of infrastructure and communication facilities.
  • Unawareness about international requirements and market.
  • Lack of co-ordination between government bodies and private players.
  • Inadequate information of new technology.
  • Inadequate information of current market trends.
  • Less interest of young people in craft industry.
  • Lack of skilled labor.
  • Still confined to rural areas and small cities and untapped market.
  • Lack of promotion of products.

Opportunities:

  • Rising demand for handicraft products in developed countries such as USA, Canada, Britain, France, Germany, Italy etc.
  • Developing fashion industry requires handicrafts products.
  • Development of sectors like Retail, Real Estate that offers great requirements of handicrafts products.
  • Development of domestic and international tourism sector.
  • e-Commerce and Internet are emerged as promissory distribution channels to market and sell the craft products.

Threats:

  • Competition in domestic market.
  • Balance between high demand and supply.
  • Quality products produced by competing countries like China, South Africa.
  • Better Trade terms offered by competing countries.
  • Increased and better technological support and RandD facility in competing countries.
  • Inspite of having diversified products, some part of Indian market is still untapped and market is price sensitive.
  • Products are high priced in big and metro cities, which are beyond the reach of people belonging middle and lower middle class.
  • Craft producers have to compete on price, quality and delivery for different segments.
  • There is poor promotion for craft products in national market.
  • There is lack of awareness about new traditions and among craftsmen
  • It is difficult to balance the cultural and commercial value of handicraft products.
  • Inadequate supply chain management and distribution reduces the sector’s commercial viability and economic sustainability.
  • Lack of Technological support and training.
  • Lack of Research and development for key handicraft sectors like, ceramics, paper making etc.
  • There is shortage of skilled craftsmen and labor to match the competition.
  • Lack of ability to produce in large scale and create economies of scale.
  • Inadequate material testing and performance measurement.
  • Inappropriate energy supplies to rural and sub-urban areas.
  • Untapped and inaccessible market due to poor transportation infrastructure.
  • There are inadequate training centers to develop skilled craftsmen
  • The primary objective is to create an environment that helps the industry to compete on the global basis.
  • To build the environment that will focus on: Wealth Creation, Infrastructure Development, Training, Technological Development, and Poverty Alleviation etc. to enhance the sector performance.
  • Awareness should be increased among craftsmen and customers through Trade Events, Seminars, Craft Forums and advertisements.
  • More training centers should be opened to provide proper training to craft persons.
  • There should be more trade shows to facilitate craft producers to access the market.
  • Transportation infrastructure should be improved to access the untapped market that would be beneficial to reduce the transportation cost.
  • Promotion of cultural tradition and heritage.
  • Promotion of Indian Tourism to attract the foreign customers.
  • Developing technologies to recycle natural resources to produce new products and ensure waste minimization, product durability and reliability.
  • Promoting Partnership and collaboration with private sector.
  • There should be market platform for craft producers belonging to rural areas to market their products.
  • Development of electronic platform by using internet to provide information, database, and marketing and distribution solution.
  • Increased Private participation in industry.
  • There should be optimized distribution network and supply chain management.
  • Through improving labor productivity in a high labor intensive and price competitive market.
  • There should be proper balance between cultural and commercial value of craft products to sustain business opportunities.
  • Through using low cost production methods the sustainability of small business can be improved.

By implementing following model, the performance of Handicraft Industry can be improved and the greater Value addition can be done:

  • Identify the Potential Market
  • Making Effective Business Plan and Refinement in existing business
  • Test Marketing to test the initial potential of new products in market
  • Effective Operational and Technological Upgradation
  • Hiring skilled manpower, provide training and awareness about latest technology and market trends and effective management.
  • Hiring skilled manpower, provide training and awareness about latest technology and market trends.
  • Cost Effective Production, Maintain Quality Standards, and Packaging.
  • Set the Costing and Pricing with Quality taken to be consideration
  • Cost Effective Distribution Development using both Physical and Electronic Distribution Channels (Internet, e-Commerce)
  • Both National and International Market Development for better Export and Foreign Revenue.

All India Handicrafts Board:

The All India Handicrafts Board was established in 1952 to suggest various solutions for improvement and development in Handicraft Industry. Formulation of Plans, Assistance to State Govt. for planning and execution of schemes, and providing assistance for Marketing, Financial, and Organizational aspects of Handicrafts Industry.

State and Union Territories: Every State and Union territories has different department for the development of Handicrafts Industry. Marketing, Promotion, Financial Aid to Small Scale Industries, and other programs are the functions of State level corporations.

Central Corporations: The Handicrafts and Hand looms Export Corporation of India: It was established in 1962. Exports Promotion, Development of potential market execution of Whole Sale and retail Orders are major functions of organization.

The Central Cottage Industries Corporation Pvt. Ltd.: It is a registered society that runs Central Cottage Industries Emporium in New Delhi, Mumbai, Kolkata, Chennai to sell the Handicrafts products.

The All India Hand loom Fabrics Marketing Cooperative Society Ltd.: This Cooperative Society is supported and promoted by All India Hand loom Board. It has various hand loom emporiums in all metro cities, Chandigarh, Ahmedabad, Hyderabad etc. and few branches in New York, Singapore etc.

All India Organizations: All India Textile Handprinting Industries Federation: 1106 Prasad Chambers, Swadeshi Mill Estate, Mumbai, India.

All India Federation of Zari Industry: Safe Deposit Chambers, Surat, Gujarat, India.

All India Carpets Manufacturers Association: Post Box No. 63, Bhadohi, District Varanasi, Uttar Pradesh, India.

Export Promotion Organizations and Councils: The All India Handicrafts Board (West Block VII, R.K. Puram, New Delhi- 110022): This organization is responsible for Export Promotion, Market Development, and Arranging Exhibitions etc.

The Gem and Jewellery Export Promotion Council (D-15, Commerce Centre, 4th Floor, Tardeo Road, Bombay- 400001): This Organization is responsible for the promotion of Jewellery, Diamond, Stones, Pearls craft of the country.

The Handicrafts and Handlooms Export Corporation of India (Jawahar Vyapar Bhavan, Anex-I, Tolstoy Marg, New Delhi 110001: It is Govt. undertaking and responsible for exports efforts of private sector promote Indian Participation in International Exhibitions.

The Handloom Export Promotion Council (123, Mount Road, Chennai- 600006): It works for the export promotion of Indian Handlooms in the country.

The Indian Institute of Foreign Trade: It provides Training Courses and publishes various survey reports.

The Trade Development Authority of India: (Bank of Baroda Building, 16 Parliament Street, New Delhi- 110001).

The Export Credit Guarantee Corporation (Express Towers, 10th Floor, Nariman Point, Bombay-400001): It provides exports credit intelligence, covers against various risks.

The Export Inspection Council (14/1-b Erza Street, World Trade Centre, Calcutta- 700001): It is responsible for Quality Control Issues, and Pre-shipment Act.

The Federation of Indian Export Organization (Allahabad Bank Building, 17 Parliament Street, New Delhi-110001) The Trade Authority of India (Pragati Maidan, New Delhi-110001): It was started in 1977 and works for exports and trade promotion and development.

The Indian Handicraft Industry stands a unique place among all other industries. It represents the rich culture, tradition and heritage of India. India’s rich cultural diversity and heritage provides a unique and huge resource for developing craft products. The Indian Handicraft Industry is showing continuous growth rate of 20% every year and it is one of the most important segment of decentralized sector in India.

Most of the part of industry operates in rural and semi urban areas throughout the country and have large and potential in Indian & International market. Indian Handicraft Industry provides wide range of products because of country’s diversified culture, traditions and heritage. There is huge demand of Indian Handicraft products in international market. Industry provides ample opportunities for employment to people belonging to backward and weaker classes of society.

However, Indian Handicraft Industry has the status of cottage industry in India, but it has shown promising growth and evolved as one of the major revenue generator over the years. It has shown continuous growth at the rate of 15-20% over the years and contributes major role for export and foreign earnings.

Low capital investment, Cheap and skilled labor, Diversified product portfolio, Flexible Production are few important features of Indian Handicraft Industry. However, Lack of Infrastructure & Technological support, Lack of awareness of international and new trends and Poor Promotional campaigns are a few drawbacks of industry which needs to be overcome. It is estimated that Handicraft Industry in India is all set to grow with rapid rate in future and contribute its share towards economic development handsomely.

The model so called Model 5 forces developed by Michael E. Porter is the one used mostly among many authors who try to recognize industry in which there is manufactures. These Five Forces Analysis or Porter’s model of competitor’s forces is often used with PEST analysis to determine a position and possibilities on a market:

  • strength of competition among manufactures that operates within fashion industry sophisticated technology, highly qualified personnel, greater capital for buying modern sewing machines (CAD/CAM) and positive influence of market growth,
  • existence of other producers of garments who are ready to enter a market, investment in technology and development, emotional connection with fashion industry and an easy strategic movement ahead,
  • customers start to change fashion products – sophisticated technology, necessary training of personnel and on the other side global accessibility of some products by internet,
  • consumer’s negotiation ability -a large demand and sophisticated technology and
  • supplier’s negotiation ability – sufficient great and growing market and a global access by internet.

Conclusion

        The problem that exists in our garment industry is that we analyze and follow trends that have already taken place on the fashion scene so while a collection is being accepted and the preparation for production is getting completed a new fashion demand is here, and the old one hasn’t got accustomed yet. Fashion companies that do not invest in the development of products and production technology get into danger and can’t “keep place” with fashion trend although they try hard.

Markets researches, consumers’ wishes, requests, and criterium mean inevitable and dominant task for a producer of garments, because by obtaining all these information a production can be directed, business planned with advanced defined aims and strategies. Marketing enables greater flexibility and better organisation for more successful reaction to market demands.

Market analyses are perhaps difficult procedures for fashion industry, because they need time to see strong sides and opportunities although they are too eager to identify weaknesses and threats. It is important to be aware that once when weaknesses are identified, some steps to change them can be taken by training, so there is possibility to make it a strong side. That’s why SSC and SWOT are useful techniques used to find out strong and weak points in a fashion industry. The way Levi Strauss & Company succeeded by their own efforts to impose a new product LEVI’S ENGINEERED JEANS (redesigned denim trousers that follow contour of a body ergonomically), it is an example how to use BCG matrix and GAP analysis that show us how market methods and techniques can be also used in our garment industry in order to meet demands of flexible production.

Retailers in India have already started the concept of co-branded credit cards. A current example would be the aggressive salesperson in any Spencer’s store showcasing the HSBC-Spencer’s offering.

Another vivid example would be the Future Group credit card which had TV ads across channels for quite some time. The response though had been lukewarm.

With organized retail sales looking downward over the last year, especially in Q3 and Q4 of 2008-09, these offering had disappeared from the table. But, Q1 & Q2 of 2009-10 have been particularly good, with around 15% growth in the sector on the back of a successful festive season.

The new buzz word that is coming up in Retail circles is the Gift card, which is basically gift vouchers/certificates in the form of smart cards.

They will be profitable for retailers as it will breed loyalty through repeat purchases. There will also be a significant portion of card value (10% in America: Economist) which are never redeemed.

Retailers in India are still nascent when it comes to maintaining a comprehensive customer database, and this will be a small, yet significant step towards the same.

The future for gift cards will yield many innovatively packaged offerings similar to the trends in America.

A few examples from the Economist:

  1. Target: Gift cards that double as wind-up toys
  2. Gift cards through email
  3. Best Buy: multiple people can contribute small amounts for

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