Among the maximum hit segments, handicrafts registered a decline of 48.35 percent in 2008-09 at $1.79 billion as against $3.48 billion in 2007-08.

The textile industry could attract only Rs.49,613 crore ($10.4 billion) investments last fiscal, down from Rs.90,369 crore in 2006-07.

The sector still suffers from high power cost and lack of power supply, the report said.

It added that state governments should offer power at low cost for new investments made in the textile industry.

Assocham further recommended that the government should increase funds under the Technology Upgradation Fund Scheme (TUFS) for textile firms from Rs.3,140 crore now to Rs.4,500 crore.

The fund can be used to clear the existing backlog of subsidy payments and upgrade technology of textile units, it added.