Kerala KHADI and the Way Forward

In the Kerala budget 2024, an amount of ₹ 14.80 crore was earmarked for the various activities related to Khadi and Village industries, the traditional industry which provides direct employment to around 14,000 people in the weaving and spinning sectors. The budget also announced a sum of ₹90 crore allocated to provide financial assistance of ₹1250 to workers in various traditional sectors, including Beedi, Khadi, Bamboo, Rattan, Fishing and Fish Processing, Cashew, Coir, Pandanus, and Handicraft.

This discussion will particularly look at the announcements related to Khadi against the backdrop of recent disclosures by the Kerala KHADI board. The board has revealed underwhelming results from its partnership with Flipkart, attributing the lack of success to minimal sales generated through this channel.

Further, the board stated they aim to enhance sales by targeting the non-resident community abroad. This shift in approach raises a fundamental question: amidst favourable conditions such as a current upward trajectory in income levels, widespread smartphone and internet usage, and consumer demographics, what factors contributed to the underperformance of their collaboration with Flipkart? Understanding these dynamics is crucial for deciphering the challenges and opportunities in the evolving market landscape.

Khadi Institutions (KIs) across India operate on a modest scale, lacking the resources to discern evolving consumer preferences and adapt swiftly to dynamic market trends. The distribution network includes 8058 sales outlets of Khadi Institutions (KI), State KVI Boards, and 23 departmental sales outlets of KVIC. In Kerala, the number of sales outlets stands at approximately 92.

In a broader perspective, the challenges extend beyond mere budget allocations and partnerships. Despite a vast array of product categories sourced from various Khadi Institutions (KIs), sales have not risen to the expected level. This is due to the lack of effective branding, which has failed to capitalise on the potential for highlighting and marketing regional differences in clothing, such as the unique offerings of Ponduru Khadi. This missed opportunity could significantly boost sales, both online and offline. The same issue persists with Kerala Khadi. An underlying issue to this state of affairs is the over-regulatory nature of the sector. The entire Khadi production process, spanning from the procurement of raw materials to yarn and final sales and distribution, is subject to rigorous regulations. These regulations pose a challenge to Khadi producers, hindering their ability to adapt to contemporary market trends. Today, an artisan or a private entity producing handspun and handwoven cloth would be unable to sell Khadi due to the absence of the Khadi mark label and the complex navigation process.

Without a robust brand presence, these traditional products struggle to stand out in a crowded market, hindering their ability to attract consumers. This impacts not only online sales, where visual appeal and brand recognition play a crucial role, but also offline sales, where a compelling narrative can enhance the overall customer experience.

The lack of innovation of KIs to upscale and market Khadi products partly stems from the lack of stimulus for KIs to go the extra mile to make profits. There is an absence of competitive spirit among KIs, owing to the robust backing provided by government support through various schemes such as ‘Interest Subsidy Eligibility Certificate (ISEC), Modified Market Development Assistance (MMDA), publicity and Capital subsidy scheme, Khadi vikas youjana etc. This has inadvertently created an environment where the usual market-driven motivation for profitability through consumer understanding and strategic market tapping is notably absent. As a result, efforts to understand evolving consumer preferences and tailored marketing take a back seat. Expanding the presence of Khadi in the market could be greatly beneficial if more players were allowed to enter and compete. Unfortunately, CPPR’s field study revealed that bureaucratic control tends to stifle competition, erecting barriers that deter new entrants.

Furthermore, inadequate pricing of Khadi products also undermines marketing endeavours. Khadi fabrics exhibit notable variations, each entailing distinct levels of manual labour and thus warranting different pricing structures. Despite these differences, KIs often strive to maintain exceptionally low and competitive prices, sometimes overlooking the intricate labour nuances involved. This approach not only constrains profit margins but also impedes the allocation of funds for essential marketing endeavours. It inadvertently hinders the marketability of unique and specialised Khadi items.

Addressing this challenge requires allowing prices to be market-driven, based on transparency in the production process of Khadi products. That is, recognising the diversity within Khadi fabrics, particularly by categorising them based on thread counts, serves as a reliable way to communicate authenticity and decide pricing. This not only empowers consumers with accurate information but also safeguards the reputation of Khadi in the market, countering any scepticism of online shopping arising from past incidents of fraudulent sales.

There is potential for increased Khadi product sales online. However, realising this potential demands strategic planning and execution. Fundamental shifts are necessary, including granting Khadi Institutions greater autonomy and competitiveness—allowing more flexibility in pricing strategies and advocating for transparency. Empowering Khadi Institutions in these aspects fosters innovation, encourages robust market engagement, and facilitates the curation of unique, market-responsive products.

Nissy Solomon is Hon. Trustee (Research & Programs) at the Centre for Public Policy Research.

Views expressed by the author are personal and need not reflect or represent the views of the Centre for Public Policy Research.