Mumbai: The Asian Development Bank (ADB) has extended a loan of $150 million (Rs600 crore) to help implement the government's reform and development programme for khadi.
Another $2 million will come as grant from the Japan Special Fund through ADB to support the implementation and monitor progress of the reform package for the khadi industry, the Manila-based multilateral lending institution said in a statement.
The money will go to technological upgradation of over 300 khadi and village industrial units, Kumud Joshi, chairperson of KVIC, said.
Khadi industry, which was expected to promote rural self-employment, has nearly stagnated in an already obsolescent textile industry despite strong market demand for textiles.
Khadi had in fact to take a backseat in the country's evolving textile market even as the textile sector overall has grown tremendously with the adoption of modern technology, branding and strong marketing.
Khadi's isolation has been blamed on aging equipment, inconsistent product quality, lack of professional expertise and funding, and lack of unity and resolve within the industry to adjust to changing market trends.
Khadi now accounts for less than one per cent of the country's textile market.
Khadi units are mostly organised by co-operatives with assistance from the Khadi and Village Industries Commission (KVIC) and financial subsidies from the central government to promote the product.
The ADB loan, to be released in four tranches over a three-year period, is aimed at revitalising the khadi industry by establishing a policy reform and implementation framework.
A revived khadi industry is expected to bolster employment opportunities in India, particularly in the rural areas which account for 73 per cent of the country's poor.