There is a familiar ritual to Indian industrial policy. A minister announces a bold new scheme, a ribbon is cut somewhere, and a few years later the same announcement is quietly made again as though for the first time. When Nirmala Sitharaman used the 2026-27 budget to propose mega textile parks “in challenge mode”, she was, as Charu Bahri points out in this sharp piece for ISignal, repeating a promise she had made five years earlier at the height of Covid. The obvious question is whether India needs more parks when the ones it has are half empty.
The stakes are not trivial. Textiles contribute 2.3% of GDP and, with 45 million direct workers, form India’s second-largest employer after agriculture. Yet the record of building parks to house them is grim it is documented but by the government’s own auditors.
A 2016 analysis found that of the 50 parks sanctioned before 2014, only 30 were functional, and among those, in the report’s words, “only four parks were fully functional. The rest were still looking for investors” – a subset that had reached just 46% of its investment targets and 57% of its employment targets. A 2023 Comptroller and Auditor General report was blunter still, recording “delays of one to more than 10 years in completion”, the cancellation of 43% of sanctioned parks, and the generation of only 30% of the promised jobs.
The CAG’s most damning observation is one any student of capital allocation will recognise. It asked why, “without ensuring successful completion of the parks sanctioned during the 10th Plan period by March 2007 … the Ministry proceeded with sanctioning more parks in the 11th and 12th Plan periods”. Announcing the next big thing before finishing the last is a habit that destroys value in companies, and, it turns out, in governments too.
So why do the parks sit empty? Location is the first culprit. Because affordable land near India’s swollen metros is scarce, says Ajay Shankar, former secretary at the Department of Industrial Policy, “state government agencies usually put together land and develop industrial parks at a distance from thriving cities”. That has its own problem. “When you develop parks in the middle of nowhere, no one wants to go there,” he says. The promised gains from clustering rarely materialise either. “Clustering is expected to generate efficiencies through access to common infrastructure, such as testing facilities, regulatory support systems, effluent treatment plants, and logistics services,” says Prerna Prabhakar of the Centre for Social and Economic Progress. “In practice, many clusters lack these shared facilities, limiting productivity gains.”
The most interesting thread, for anyone who thinks about where capital actually wants to go, is why the private sector stays away. Textile manufacturing at the lower rungs of the value chain, from yarn to garments, is, in the words of Varun Vaid of Wazir Advisors, “typically low to medium margin”, and the scheme was never designed to draw private money in. “The central premise was that 1,000 acres for the textile sector would come from the state government; in any case private companies with so much land would prioritise other more profitable sectors,” he says. Given a free choice, he notes, private developers would sooner pick “a sector where the returns and addressable market are higher, such as automotives and renewable energy”. Shankar’s phrase for the missing ingredient is “patient capital”, which, the article notes, is not always forthcoming from the private sector. A park cannot conjure returns that the underlying business does not earn.
There are counter-examples. Brandix India Apparel City in Visakhapatnam employs some 22,000 people, about 90% of them women, and exported $350 million of garments last year, though even it sits well below its planned density. The lesson, as industrial policy expert Sharmila Kantha puts it, is unglamorous: “Making under-occupied existing parks a success hinges on a combination of urban and industrial planning.” Fix what you have already built, in other words, before cutting another ribbon.
If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
