1.
Course: Scientific Communications On Rural
Development
Article title
“How China is affecting India’s rural development by dumping silk yarn at
prices below the cost of production.”
Submitted to,
Xavier Gellynck
Hans De steur
Evy Mettepenningen
Submitted by,
Sadhana Hullenahalli Shankaregowda
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2.
Sl. No. Content
1. Abstract
2. Introduction
3. Review of literature
4. Discussion and conclusion
5. Policy recommendation and future research
6. Reference
Tables
Table 1. Growth rate in raw silk imports against performance of Indian Sericulture industry
Table 2 Comparative performance of BV hybrids and Cross Breeds
Table 3 Comparative mulberry Sericulture statistics between China and India
Table 4 Criticisms of Antidumping duty and other precaution measures taken by CSB, GOI
against Chinese silk dumping.
Table 5 Industrial and Policy recommendations against Cheap Chinese silk imports.
Figure
1. Antidumping investigation conceptual frame work
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3.
How China is affecting India’s rural development by dumping silk yarn at prices below the
cost of production
Abstract
India is the largest consumer and the second largest producer of silk after China. Huge
demand supply gap coupled with poor quality and low productivity, India started to import raw silk
from China. Gradually, India turned out to be largest importer of silk. But, importing of silk at a
price lower than the cost of production caused severe injury to sensitive domestic sector. It
prompted Government of India to impose antidumping duty on China in line with DGAD guidelines.
With this backdrop, present study is a modest attempt to understand the impact of dumping,
effectiveness of measures taken to safeguard domestic industry and to suggest measures to
strengthen the same.
The endeavour reveals that though antidumping duty acts as remedial measure to prevent the
material injury caused to domestic industry, it can’t be a permanent solution to problems associated
with dumping. In this regard, strengthening the competitiveness of the domestic industries need to be
given first priority. In these lines, Government of India has taken up many measures to increase the
productivity of domestic silk industries thus improving their efficiency. For example development of
Bivoltine hybrid cocoons which can produce good quality silk with a enhanced productivity. But the
technologies need to be popularised at ground level which needs strengthening of extension delivery
sytem.
Key words
Silk, Trade, Antidumping, Globalization, India, China.
Meaning and Abbreviations
AD duty Antidumping duty
BSTDPBivoltine Sericulture technology development programme
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4. Bivoltine (BV): A species that has two broods of offspring per year.
CRC Chawki rearing centres a private centre where farmers can get silk worm eggs.
CSB Central silk board
DGAD Director general of antidumping duty. Ministry of commerce, Govt. of India.
GOI Government of India
JICA Japan International Cooperative agency
Multivoltine (MV): Species that has two or more broods of offspring per year.
SMOI Silk mark organization of India, Sponsored by CSB. Serves as a brand for generic
promotion of pure silk.
1. Introduction
The world production of raw silk as on 2010 is 1, 40,051 MTs. (CSB, 2011).Whereas India and
China contribute major share of about 95 percent to the world silk production (Curry, 1997 and
Ravindrakumar, 2008) with 1, 15,000 MTs and 20,410 MTs of silk production (CSB 2011)
respectively. India is the second largest producer of silk in the world next to China, with 15.5
percent share in global raw silk production. It is also the largest consumer and importer of silk and
silk goods (CSB, 2011 and COMTRADE, 2007) with unique distinction of producing all the four
varieties of silk viz., Mulberry, Tasar, Eri and Muga (Giridhar et al.. 2010).Mulberry alone
contribute more than 83 percent to the total raw silk production of the country. The major mulberry
silk yarn producing states in India are Karnataka (>60 %), Andhra Pradesh (22 %) and Tamil Nadu
(5%) %)(COMTRADE, 2007 and Ravi kumar, 2008).
Sericulture is the production of silk in India represents both culture and tradition, there are no
function in India is complete without silk in any form (Mir Nisar, 2011). It is a farmbased, labour
intensive and commercially attractive economic activity. Cultivation of silkworm food plants,
silkworm rearing, silk reeling, and other postcocoon processes (twisting, dyeing, weaving, printing
and finishing) requires lot of human labour.
Sericulture is practiced as a cottage industry and extends to almost all major states covering over
59000 villages, providing sizeable employment to around 6.8 million people (Gangopadhyay, 2008).
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5. It particularly suits ruralbased small and marginal farmers, entrepreneurs, artisans and other weaker
sections of the society as it requires low investment with potential for relatively higher returns in an
eco friendly manner (Mir Nisar, 2011). It is acting as a remedy for seasonal unemployment and also
by providing job for the rural youths it is reducing their migration to urban area (Gangopadhyay,
2008).
According to Mir Nisar (2011) and CSB (2011) during 201011 the employment in Sericulture
sector was 72.5 lakh persons when compared to 68.17 lakh persons during 200910. However
5560 percent (Gangopadhyay, 2008) of Sericulture activities are undertaken by rural women only.
(Gangopadhyay, 2008) If fashion is a fine art, then silk is its biggest canvas and is silk is the canvas,
then all its weavers, dyers, designers, embroiderers are the greatest artists. Indian silk has enthralled
fashion watchers and all categories of consumers across the world with its vast repertoire of motifs,
techniques and brilliant hues. India’s traditional and culture bound domestic market and an amazing
diversity of silk garments that reflect ‘geographic specificity’ has helped the country to achieve a
leading position in silk industry.
Indian silk goods have high export potential because of its unique distinctiveness of producing all
types of silk and low cost of production. (Gangopadyaya,2008 and nisar, 2011 ) However India
export approximately 15 percent of its output in the form of fabrics made ups, readymade garments
and finished materials like curtains, carpets, bed spreads, cushion cover etc. The export earnings
from silk are growing steadily because of increasing demand for Indian silk goods particularly from
USA and European countries.
Since 2002 this increase in import of Chinese silk leads to Dumping at cheaper rate by causing
severe material injury to the domestic silk industry. During 200203, with the intervention domestic
silk industries and CSB, DGAD (GOI) imposed an antidumping duty for the Chinese raw silk yarn
(Discussed below). Due to the extended nonstop dumping of Chinese raw silk, antidumping duty is
revised and still continued. Thus the Prices of raw silk in India move in line with prices of Chinese
imported silk. (Datta R.K et al., 2000) Nevertheless, imposition of antidumping duty has helped in
stabilising domestic prices of raw silk. However, since Chinese exporters continue to dump raw silk
below the domestic raw silk prices, any fall in prices of Chinese silk continues to push down prices
in the local market. The farmers and reelers thus are left to the vagaries of price fluctuation of raw
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6. silk, which is mainly determined by the imported Chinese raw silk price.
Based on literature reviews, this paper studies the impact of Cheap Chinese silk import and offers
an answer to
• What are the reasons for dumping?
• How effective is the antidumping duty in mitigating the dumping of silk?
• What are the other measures to be taken care before antidumping duty?
• What are the bottle necks of antidumping duty?
Finally end with discussion and conclusion with some policy recommendation.
2. Dumping of silk and its impact on domestic sector
Dumping is "the sale of a good abroad at a price which is lower than the selling price of the same
good at the same time and in the same circumstances at home" (Haberler, 1936 and Wilczynski. J.,
2013). Dumping margin is the difference between Normal value of silk in any third country or the
exporting country and the Export rate, which is helpful to measure the rate of impact of Dumping on
domestic country.
Apart from India’s inability to meet to exploit the export potential and dependency on imported raw
material, another grave issue is pertaining to cheap imports of raw materials ruining the domestic
sericulture Industry (Rajesh 2011). The review shows that China is repeatedly importing raw silk
and silk fabrics to India at cheaper rate which is even less than the cost of production of raw silk in
India (Tikku, 1999; DGAD, 2003, 2006, 2008; CSB, 2004, 2007; Mir nisar et al., 2012, Anitha
R. 2011). The share of imported raw silk increased from 91.68 percent to 92.61 percent
(200203) (WTO 2003). The raw silk imports to India increased from 7896 tonnes in 2001 to
10,501 ton in 200203 which is 33 percent increase in one year, during subsequent year the
domestic silk production fell from 17 ,351 tonnes to 14,620 tons (CSB 2003 ). The dumping
margin during 200203 was around 48 percent, and during 200708 it is around 31 percent
(DGAD 2003, 2008), so it was clear that the dumping from China PR has not ceased in spite of
antidumping duty being in existence and it was also noted that the imports from China PR in
comparison to total demand as well as total domestic production over the injury investigation period
has almost doubled. (DGAD 2008)The imports from China PR have increased not only as a share
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7. of total imports (increased from 28 to 93 percent) but also in comparison to total demand and
domestic production over the injury investigation period. So that again the Authority extended AD
duty for 5 more years (until 2014).
1. Impact of dumping
Table 1: Growth rate in raw silk imports against performance of Indian Sericulture
industry
Source: CSB database 200506, Values in parenthesis is percent growth rates.
Table 1 compares the annual growth rate in raw silk imports for five years from 2000 against the
performance of Indian sericulture industry and reeling sector.
(Rajesh.G.K 2011)The prices of domestic rawsilk and cocoon are observed to be worst affected
during the years 200102 and 200203, the periods in which imports grew very high and prices of
imported silk kept falling. Thomas et. al (2005a) showed that the cocoon price get influenced by the
yarn prices with a lag of six to ten days. From the table 1, it is clear that during 200102 and
200203 when domestic raw silk prices fell by 4.9 and 24.1 percent respectively, the cocoon price
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8. also fell by 4.8 and 10.8 percent. This has impacted on cocoon production, lowering it by 8.2
percent and 8.4 percent during 200203 and 200304 respectively. The data shows that the effect
of imports influenced the mulberry plantation also.(Rajesh.G.K 2011) During 200203 in Karnataka
alone 23 percent of the existing mulberry plantations were uprooted and in the subsequent year
another 10 percent uprooting occurred. 6780 charka reeling units have closed down over the six
years where as the number of cottage basin reeling units have increased by 846 only. The number of
multiend reeling units has also fallen by 59. This means considerable labour displacement from the
charka sector during the six years which is not likely due to up gradation of the charka units into
cottage basins.
(Rajesh.G..,2011, CSB, 200506)The fall in prices, quantity of cocoon production and mulberry
area and labour displacement from the reeling sector cannot be completely attributed to the raw silk
import. Many other socio economic factors could be at play. (Rajesh G..,2011)However it is seen
that subsequent to a protectionist intervention of the government during 2003, the quantity of
imports fell by 2.3 percent, domestic raw silk prices increased from Rs. 805.00 to Rs. 984.00 per
kilogram (22.2 percent growth) and cocoon prices increased by 17.8 percent(Rajesh.G.K.,
2011).During the subsequent year the quantity of cocoon production showed slight improvement
(2.2 percent growth) and the mulberry uprooting rate came down from 10.26 to 2.23 percent. This
indicates that the silk imports have had a deleterious effect on the domestic sericulture.
2. Reason for Dumping of Chinese silk
The Indian sericulture industry is currently faced with the problems of stagnation in production, low
productivity, poor quality to produce, high cost of production, and competition from cheap raw silk
import from china.
The sericulture industry is built upon two living organisms, ie, silk worm and its food plant mulberry.
Thus quality and quantity of raw silk, outputs are primarily dependent on the genetic potential of
mulberry and silk worm breed. Almost 95 percent of silk produced (Rajesh G.K 2011 ) in India is
from traditional low yielding multivoltine silk worm varieties or cross breeders which are relatively
poor yielders (CSB 2007) but they are known for their hardiness (table 2). The cocoon produced
by them are unsuitable for reeling is sophisticated reeling machines and the raw silk produced from
which is characterised by lower filament length and lesser tensile strength leading to breakage
making it unfit for high speed power loom weaving(Kumaraswamy et al. 2002). This power loom
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9. industry is heavily dependent on imported Chinese raw silk which is of superior quality (Vasumathi
2000; Thomas et al, 2005).the indigenous raw silk which is largely consumed by the handloom
sector and partly by powerloom sector as weft (Vasumathi 2000, Rajesh.G.K, 2009 and Thomas
et al, 2005b).
Table 2:Comparative performance of BV hybrids and Cross Breeds
Hybrid Cross Breed Bivoltine hybrid
(PM X NB4D2) (CSR2 X CSR4)
Colour Yellow White
Silk quality4
4B 2A to 4A
Renditta5
8 6
Filament length (meter)6
750 1150
Yield per 40,000 larvae.(Kg) 50 70
Survival (%) 70 53
Cocoon price per kg. (Rs.) 100150 180240
Source: Dandin, S.B; H.K. Basavaraja and N. Suresh Kumar (2005)
4 The international quality standards prescribe grading of raw silk from A to D, A being the higher
quality. Above A grade a further classification in the ascending order 2A, 3A etc. is done.
5 Renditta is the measure that indicates the quantity of cocoons required to produce one kilogram
of raw silk, for the crossbreed it is above 8. This means that an average of 8 kg cocoons are
required to produce one kg of raw silk. On the other hand, the new bivoltine hybrids have the
renditta less than six. Hence, the silk production can be improved by 30 per cent by merely
switching over to bivoltine raw silk production.
6 Filament length is the length of the continuous filament that could be recovered from the cocoon.
Although, Indian breeds or hybrids have the potential to produce same quality of silk, the system of
sericulture practice is entirely different from China (table 3)(Goswami 2008, Kumaresan et al.,
2002). The strict maintenances of discipline and better linkage from farmers to weavers, large scale
operation of egg production, reeling and weaving using modern machineries, strict control measures
of diseases, uniform adoption new technology, supply of required quantity and quality of eggs in time
to adopt avoid the chances of contamination of young silk worm(Nisar 2011 and Rajesh G.K
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11. done by Long.L et al 2006, (table 3) indicate the strength of china in the areas of seed production
and distribution system, higher unit area productivity and quality thus reducing the cost of
production.
3. Antidumping duty
Anti dumping is a measure to rectify the situation arising out of the dumping of goods and its trade
distortive effect (Neils, G. 2000.). Thus, the purpose of anti dumping duty is to rectify the trade
distortive effect of dumping and reestablish fair trade. The use of anti dumping measure as an
instrument of fair competition is permitted by the WTO (Czako J,et al 2003). It provides relief to
the domestic industry against the injury caused by dumping (Agarval 2002).(WTO, 2006) The rules
and procedural aspects of anti dumping measures are specified by the WTO (and earlier GATT).
The Government is to designate the anti dumping authority in each country. Affected local producer
is expected to file for AD action against foreign imports in specific forms with the proper statistics
proving dumping. The foreign exporters are given a chance to state their position in the anti dumping
investigation and the dumping authority determines the dumping margin if the export price is less than
the normal value. (DGAD,2003) (see fig. 1).
After careful investigation, DGAD designated authority, ministry of commerce, Govt. Of India,
noticed about 47.89 percent of dumping margin during 200203(DGAD 2003), it was significantly
high and caused severe material injury to domestic industry. Accordingly it is imposed a definitive
Antidumping duty of about 27.98 $ for a Kilogram of Chinese mulberry raw silk of 2A grade and
below as per the internationally accepted grades approved by the international silk association.
Import below this price would attract duty equivalent to the amount that was below the base price.
This has ensured enough protection to Indian silk yarn producers with floor price of Chinese silk
rising to Rs. 1311 a Kilogram (The Hindu 2006) against the prevailing domestic price ruling around
Rs. 1200 for a Kilogram.
Despite the imposition of antidumping duty, Mulberry raw silk imports from china more than
doubled during 200607(CSB 2007, DGAD 2008). Imports totalled 590.5 tonnes valued at Rs.
588.20 crore against 277.4 tonnes valued at 347.60 crore during a year ago (DGAD 2008). During
200708 domestic mulberry raw silk averaged at Rs. 1149 a Kilogram against Rs. 1,253 in 2005
(Fibre2fashion 2007, CSB 2007). It said china had quoted very low prices to Indian customers,
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12. forcing industries to quote even lower or lose their sales volume.
Until 2009 same level of AD duty was continued, later with the intervention of CSB and other silk
industries, government has further extended the AD duty for five more years from 2009 by
increasing the slab to $37 per kilogram of Chinese raw silk of 2A and below grade (DGAD
200809).
1. Impact of AD duty
Sericulture farmers and silk reelers are the two main sectors who have been affected badly due to
dumping. But after the imposition of AD duty on cheap imports of Chinese silk, the prices of
domestic sericulture commodities have improved and the stake holders of silk industry are now
taking keen interest to take up sericulture on large scale due to favourable condition. So over the
year the production is also increasing. (CSB 201112) During 201112 production of raw silk in
India is about 23,060 Mt compared to 20,410 MT area under Mulberry plantation is also increased
from 1.70 lakh hectare to 1.81 lakh hectares (CSB 201112) and also farmers are getting
comparatively favourable prices for their cocoons based on its quality . So these are the indicators
of Improvements in domestic sericulture sector after AD duty imposition.
Weavers and exporters of silk in domestic Industry are the two sectors boomeranged badly due to
the antidumping duty. Because of AD duty prices of raw silk, being a main raw material for any silk
product, have increased to 32$ to 37$ in domestic market during 2009 from 12 $ to 13 $ in 2003
(fibre2fashion, 2009). As a result, prices of finished goods have also risen, affecting the country’s
export.
Table 4. Criticisms of Antidumping duty and other precaution measures taken by CSB,
GOI against Chinese silk dumping
Criticisms of AD duty
Other measures against cheaper Chinese silk imports
by CSB
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13. Increased Smuggling: Local
industry will be smuggled
mulberry raw silk by unsocial
elements results in loss of revenue.
(fibre2fashion, 2008)
Increased evolution of high yielding breeds. Recent switching
to high yielding mulberry varieties from conventional K2 and
CSR2 x CSR4 from the Multivoltine x Pure Mysore x NB4D2
are typical examples,through which productivity increased
dramatically (CSB, 201011)
Foul play by Chinese silk
exporters by selling 2A and below
grade silk as 3A grade to avoid
AD duty.(The Hindu 2006,
fibre2fashion 2008)
CSB took up BSTDP in a bigger way with JICA. Research
was put to swing to develop various technologies, which were
duly test verified on a multi location base. (CSB 2010, 2011)
AD will bring Unemployment to
thousands and lakhs of weavers in
the unorganized sector of India.
(The Hindu, 2007 and
fibre2fashion, 2007)
Technology transfer from traditional reeling device and old
charka to semi and fully automatic reeling machines and multi
end reeling machines helps to produce high quality silk.(CSB,
2010)
High cost for final silk goods like
Saris due to increased cost of
imported raw silk.
(fibre2fashion 2007)
Shifting to Shoot system of mulberry cultivation and rearing
which is extensively following in Japan can reduce labour cost
by 60 percent.(CSB 2010,2011)
AD duty is Unfair to domestic
consumers and foreign exporters.
(Neils.G., 2000)
Possible to partially or fully mechanize the plantation through
paired row system of cultivation.(Gangopadhyay, 2008 and
CSB 2010,2011)
Seeking alternative supply source
by the exporter.
(Neils, G., 2000)
Silk mark scheme introduced by SMOI as a quality assurance
label for pure silk.
(CSB 200910 and Gangopadhyay,2008)
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14.
A solution to quantitative and qualitative problems of Indian silk industry is popularization of high
yielding silkworm hybrids that can also yield better quality silk. The bivoltine silk worm races
prevalent in the temperate countries are characterized by high productivity (8001250 kg cocoons /
hectare of mulberry) and high quality silk as compared to multivoltine races of tropical countries
(160440 kg cocoon / ha. of mulberry) (Jayaswal etal, 2001; Rajesh G.K, 2011 ). The efforts to
popularise Bivoltine hybrids in India met with limited success at the adoption level (Kumaresan 2002
and Rajesh G.K 2011). It is seen that at present bivoltine silk forms below 10% of total raw silk
production, the remaining being produced from traditional inferior breeds and cross breeds (CSB
2011). This indicates that only below 10% of the farmers have adopted bivoltine hybrids in the
country and the remaining are with conventional cross breeds or other inferior breeds, the silk
produced out of which is of low quality suitable for handlooms only.
2. Factors affecting adoption of Bivoltine silk worm by the Indian sericulture farmers
(Rajesh G.K, 2011)
In agreement with the empirical literature on adoption, age and education are found to impact
negatively on bivoltine adoption decision. So also farm size exerts a positive influence. Mitigation of
perceived risk and uncertainty are found to be important on adoption of bivoltine hybrid. While
family labour availability discouraged bivoltine adoption, credit encouraged it. The importance of
profitability is emphasised by the results. The three variables capturing reduction in profitability of
bivoltine sericulture showed significant negative influence on its adoption, from the supply side while
subsidies appear to be an encouraging factor for bivoltine adoption the extension efforts of private
CRCs (supplying cross breed worms) is found to deter the choice of bivoltine hybrid by the farmer.
4. Discussion and conclusion
Rural sericulture farmers are the back bone of Indian silk industry, one or the other way they are the
main reason for larger production of silk in India. In order to fulfil the huge demand of consumers,
India started importing silk from china which leads to dumping. Finally it started affecting the rural
farmers, reelers and weavers severely. Imposition and renewal of antidumping duty over the years
for Chinese silk is acting as a temporary solution for the material injury caused to the domestic
sericulture sector, but it is not a permanent solution. It is also having many draw backs like
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15. smuggling of Chinese silk though Nepal and other non restrictive seaports and airports to avoid
Antidumping duty, reduction in the export potential of Indian silk exporter due to heavy cost of final
silk goods and if there is any fall in import duty will continue to push down the prices in the local
market. The farmers and reeling sectors are still left with the vagaries of price fluctuation of raw silk.
Also the efforts made by the CSB to develop new technologies and new hybrid silk cocoons are
met with the limited success due to low adoption level by the farmers.
5. Policy recommendation
In addition to the antidumping duty, if Indian sericulture industry solve these issues then they can
stop the Dumping of silk permanently
Table 5: Industrial and Policy recommendation against Cheap Chinese silk imports.
Domestic Sericulture Industry
recommendation
Policy recommendation
1. Increased adoption rate of Bivoltine hybrid silk
cocoon in all the states, especially in Karnataka
as its contribution is high.
With the intervention of
Government, contract farming
between Sericulture farmers and
weaving sector can be able to
reduce imports and improve
quality and quantity of produced
silk.
2. Adoption of modern reeling machines like multi
end reeling machine in place of old charka
reeling machine can improve the quality of raw
silk yarn.
Restriction on quantity of raw silk
imports only up to the extent to
meet the demand supply gap with
normal price.
3. Strict quality control measure by the
government will increase the interest of the
farmers and it can also bring weaving sector to
the farmers.
Providing better training facility
for the farmers regarding Bivoltine
hybrid cocoon production, pest
and disease management and
cocoon quality aspects.
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16. 4. With the adoption of developed technologies in
Mulberry area can reduce the labour cost and
also the efficiency of mulberry production.
Technology transfer at farmer’s
level through better extension
service.
5. Encouraging research Scholars especially in
Biotechnology fields to develop more region
and season specific high yielding hybrid silk
cocoons.
Providing subsidy and financial
support by the government to
sericulture farmers especially who
are cultivating BV silk breeds.
6. Future research
Research should be done by engineering sector in order to develop low cost new technologies at
farmer’s level to improve efficiency of farmers and to decrease the cost of production of cocoons.
More Research should be done by the extension agents to identify the factors which are mainly
affecting the adoption rate of new technologies and new varieties of silk cocoons by the farmers and
how to convince them.
1. Open question
Where the comparative advantage does lies, is it with the silk weaving sector or with the sericulture
farming sector.
7. Reference
Agarwal Aradhana (2002). Anti dumping law and practice –An Indian perspective. Working
paper no 85, Indian Council for Research on International Economic Relations, New Delhi.
Anitha.R. (2011). Indian silk industry in the global scenario. International journal of
Multidisciplinary management studies , 101110.
Central silk board. (200607, 200809,200910, 201011). Annual report of CSB. Bangalore
560 068: CSB member secretary.
COMTRADE (2007): United Nations, Comtrade Data Base (New York: United Nations Statistical
Office, 2007).
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