Kerala’s Missed Opportunity in Textiles: The Story of Kitex Garments and Telangana’s Rise

The state of Kerala, known for its literacy rates, high human development indicators, and beautiful backwaters, was once on the verge of becoming a global textile hub. Kitex Garments, the second-largest manufacturer of children’s apparel in the world, was poised to make Kerala a major player in the global textile industry. Yet, in a dramatic twist, Kitex chose to relocate its expansion plans to Telangana, a decision that cost Kerala a golden opportunity.

This is the story of how Kerala came close to dominating the textile sector, only to see the trophy handed over to Telangana due to a mixture of political uncertainty, industrial discontent, and bureaucratic roadblocks.

The Rise of Kitex Garments

Kitex Garments, founded by Sabu M. Jacob in 1992, initially started as a small-scale textile unit in Kizhakkambalam, Ernakulam. By 2014, it had evolved into one of the world’s largest infant garment manufacturers, exporting products to global giants like Walmart, Amazon, Gerber, and Jockey. In 2019, the company earned revenues exceeding ₹1,500 crores ($200 million), with exports to the United States contributing around 90% of its business.

Sabu Jacob had ambitious plans to scale Kitex into an even larger player, with an investment proposal of ₹3,500 crores ($450 million) aimed at expanding its facilities in Kerala. This would have potentially created over 35,000 jobs in the state, along with downstream industries.

Kerala’s Industrial Climate: The Problem

Despite Kerala’s achievements in social indices, its industrial landscape is marred by a challenging bureaucratic and regulatory environment. The state’s government has been criticized for its labor laws, which are seen by many as skewed in favor of workers, often making it difficult for businesses to function smoothly. The consistent presence of trade unions, long-standing bureaucratic delays, and regulatory hurdles have contributed to Kerala’s reputation as a tough place for large-scale industrial investments.

In 2021, Sabu Jacob publicly criticized Kerala’s government, accusing it of harassment and excessive red tape. He claimed that over a span of six months, his company had received multiple inspections from various departments, causing disruptions in operations. These inspections, combined with pressures from trade unions, made it difficult for Kitex to operate without facing undue obstacles.

In July 2021, the situation reached a tipping point. Kitex announced it was pulling out of the proposed ₹3,500 crore expansion project in Kerala. Jacob declared, “Kerala is a terrible place for any business,” pointing out that the state government and its bureaucracy had turned its back on industrialists who were once eager to invest in Kerala.

Telangana’s Winning Formula

Telangana, a newly formed state (established in 2014), saw an opportunity in Kitex’s disenchantment with Kerala. K. T. Rama Rao (KTR), Telangana’s Minister for Municipal Administration and Urban Development, Industries, and IT, was quick to extend an invitation to Sabu Jacob. Telangana has been positioning itself as an investor-friendly state, boasting transparent governance, minimal red tape, and an industry-friendly policy framework called TS-iPASS, which offers swift clearances for new projects.

In a series of discussions, Telangana promised Kitex several benefits, including land, infrastructure, subsidies, and a conducive business environment, free from the interference of trade unions. Jacob was impressed with Telangana’s proactive governance, saying, “It was a contrast. In Kerala, I felt harassed, while Telangana made me feel like an honored guest.”

In September 2021, Kitex announced that it would invest ₹1,000 crores ($135 million) to set up its largest textile unit in Telangana. The plant would be spread across 250 acres and is expected to create 4,000 direct jobs in the first phase, with a total of 20,000 jobs once fully operational. Telangana celebrated this as a significant win for its growing textile industry.

Telangana’s rise as a textile giant.

Kerala’s Loss: A Missed Trophy

The shift of Kitex from Kerala to Telangana is a cautionary tale of how industrial discontent can push away even homegrown giants. Kerala’s rigid labor laws and bureaucratic inefficiencies ultimately cost the state a massive opportunity. The loss wasn’t just financial. It hurt Kerala’s reputation as an investment destination and sent a signal to other potential investors that the state is a challenging environment for business.

Had Kitex been able to expand in Kerala, it would have been a game-changer for the state’s struggling industrial sector. The employment of over 35,000 workers in rural regions could have significantly reduced migration to Gulf countries and urban centers. Moreover, the ancillary industries that would have grown around Kitex would have provided a much-needed boost to Kerala’s economy.

What Kerala Can Learn

Kerala’s textile journey isn’t over, but the episode with Kitex should be a wake-up call for the state to reform its industrial policies. The labor movement in Kerala is one of its proudest achievements, but it must strike a balance between protecting workers’ rights and providing a conducive environment for businesses to thrive. The government needs to streamline regulations, reduce bureaucratic delays, and create a single-window clearance system similar to Telangana’s TS-iPASS to attract industrial investment.

Additionally, Kerala must address the perception problem that it is an anti-business state. High human development indices and a strong social fabric must be seen as assets rather than obstacles to industrial growth.

The Future of Textiles in Telangana

As Telangana continues to woo more textile giants, it is steadily building an ecosystem around the industry. With initiatives like the Kakatiya Mega Textile Park, the state is becoming a textile hub, attracting both national and international investors. The success of Kitex in Telangana could spur other companies to move away from more challenging states, further strengthening Telangana’s position in the Indian textile landscape.

Kitex’s presence in Telangana will also lead to technological advancements and job creation, further integrating the state into global supply chains. Telangana’s calculated steps in creating an industry-friendly environment can serve as a model for other Indian states looking to balance development and industrial growth.

Conclusion: From Near Victory to Strategic Loss

The story of Kitex Garments is more than a tale of one company’s relocation. It is a broader reflection of how industrial policy, governance, and business environments can make or break a state’s ambitions. Kerala’s potential as a textile giant was real, but systemic issues allowed Telangana to swoop in and claim the prize.

Kerala now faces the challenge of reforming its approach to industry while Telangana continues to thrive on its successes. As India’s industrial landscape shifts, this episode highlights the need for a balanced approach, where workers’ rights and business interests can coexist for the prosperity of all.