The Indian textiles industry holds an important place in our economy in the context of employment and exports potential. The industry is the second largest employment provider after agriculture with direct employment to 45 million people and supports 100 million people indirectly. The textiles and apparel sector has 8.21% share in the country’s total exports.
The industry contributes more than 2% to country’s GDP. In short, the industry is critical for the economy and the ruling government. The government has set a vision of increasing the textile market size from current US$162 billion to US$300 billion and out of these exports from present US$35 billion to US$100 billion by 2030.
The last few budgets have been non-events for the textiles industry but the one presented this year by Union Finance Minister Nirmal Sitharaman has some game-changing announcements that would benefit the industry in the long run.
Announcements which will directly benefit industry
The allocation to the textile sector has increased significantly by 57.7% to ₹5,252 crore (52,520 million) in this fiscal’s budget from last fiscal’s ₹3,342 crore. It is majorly due to increased allocation of ₹1,148 crore to the PLI scheme (which is expected to attract some more investments in global scale MMF and technical textile manufacturing).
At present India is suffering from a very low yield of cotton (436 kg per hectare) much below even the world average (750 kg per hectare). A much-needed ‘Mission for Cotton Productivity’ has been announced in the budget with a provision of ₹600 crore. The five-year mission will increase productivity and sustainability of cotton farming. A support in terms of science & technology will be provided giving thrust to high yielding seeds.
Emphasis on growing extra long staple (ELS) cotton is another positive announcement. This will help in making India self-sufficient in superfine high-quality fabrics as at present 12 lakh (1.2 million) bales of ELS cotton get imported from Egypt and the US to cater to the demand.
India at present produces only 5 lakh bales of ELS cotton which used to be 25 lakh bales during the 1980s. The value addition opportunity in case of the ELS cotton is nearly 10-fold hence it has huge potential to boost exports of high value fabrics and garments.
The proposal to impose import duty of 20% or ₹115 kg (whichever is higher) on nine types of knitted fabrics will help in curbing cheap (under invoiced) imports from China. This should control the cheaper imports from China and help the domestic MMF knitting industry.
India is emerging fast in the technical textile sector. To support this, announcement has been done to exempt Basic Customs Duty (BCD) on the shuttle less looms of specific capacity, especially to help agro textile, medical textile and geo textile segments. The approach of the government seems to be to make India globally competitive and technology-driven in the textiles and technical textiles sector.
The medium, small and micro enterprises (MSMEs) are one of the growth engines of our economy and the textiles industry is mainly made up of MSMEs. The MSMEs contribute nearly 30% to India’s GDP, 36% of the manufacturing output and 45% of total exports. The budget made a strong commitment to MSME growth and clean-tech manufacturing. The ‘National Manufacturing Mission’ for the MSME’s will make them ready for green future which will also help the export focused textile MSMEs.
Enhanced credit limits and investments for the MSMEs, increased credit guarantee cover for micro and small enterprises to ₹10 crore from ₹5 crore will benefit a large section of the textile MSME units spread over weaving, knitting, processing, and apparel sectors.
With widening of the horizon of MSME definition, textile companies with revenues up to ₹500 crore can be onboarded, expanding the universe. Many of the textile manufacturing companies can now take advantage of their inclusion under MSMEs.
With the launch of the ‘Export Promotion Mission’, with an outlay of ₹2,250 crore support, the textile MSMEs will get benefitted since it will facilitate export credit, cross-border factoring and aligning with international practices. This will help the apparel sector in increasing the garment exports which at present are stagnant.
The Digital Public Infrastructure (DPI) platform called ‘BharatTradeNet’ for trade documentation and financing solutions will eliminate paper-based processes. This along with the Export Mission will reduce trade-related costs and compliances for the exporting textile units.
