The Rise of Khadi: The underdog's steady climb

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One story that emerged recently was Nitin Gadkari pushing for honey as an alternative to sugar on flights in India. The move, if accepted by top airline players should help provide an impetus to rural and tribal industry in India, and help income growth in the segments that need it most. In today's post we look at how the Khadi Village Industries Commission has been growing quietly and steadily, the need and benefits of protecting and enhancing rural income, and the opportunities that lie ahead for this humble consistent compounder.

How well has KVIC done?

The Khadi and Village Industries commission reported revenue of a whopping 75,000cr for FY19, with Khadi industries growing at 21% CAGR and village industries growing at 22% over the last five years (talk about consistent compounders!), a period where broader markets struggled to grow amidst multiple challenges of demonetization, NBFC liquidity squeezes, and slowing global growth. Khadi's share in the country's textile production has gone up from 4.2% to 8.5% in the period.

How does it help?

Perhaps the best thing that the KVIC does is provide a means of gainful employment to rural and tribal workforce without having to displace them. This solves multiple issues: 1. It reduces burden on the state to support these people through schemes like MNREGA 2. It reduces the stress on select urban centers due to migration 3. It provides income and income growth to people who stand to benefit from it the most. In the last 5 years 350+ khadi institutes have been opened up that have trained 40,000+ artisans. Having a larger organization overseeing and managing the activities also ensures that the small individual artisans aren't exploited by third parties. It also enables them to strike important partnerships with larger corporates like Raymond, Aditya Birla Textiles and the like, which has helped support and grow revenues.

What lies ahead?

As India grows into a superpower, it helps to grow inclusively taking the most dispossessed with us. The KVIC enables the country to do just that, leveraging the immense skill and talent of our local artisans and workers to create things of value. In the long run it would help to redirect funds from alternate employment schemes to skill and retrain workers here so that not only can more people create with the KVIC, but the value enhancement that they can do increases as well. As the industry grows, finding and growing channels to reach both the domestic Indian consumer as well as the experience seeking international consumer could provide both a volume and price boost to the industry. This combined with increased integration with the Indian textile and consumer industry (honey/bamboo etc) could provide many more years of such sustained growth.

With a country as large as India, with still a predominantly rural population, the growth of the KVIC is something that most people will be rooting for. And they seem to be equally keen on living up to the expectations!

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