The Modi Government’s major mission of “Make in India” is predicated on the basic assumption that it would encourage domestic manufacturing in a big way in as much as it is also highly helpful to generate employment to a greater number of people. Hence, production and exports stemming from light manufacturing segments such as leather products and textiles assume pre-eminent priority in the scheme of things of the authorities.
The end of the restrictive Multi-fibre Arrangement (MFA), a sort of global trade pact on textiles and clothing that was in practice from 1974 till 2004 putting limits by way of quotas that developing countries could export in the form of yarn, fabrics and clothing to developed nations, provided a huge opportunity for competitive exporters such as India, Bangladesh and Vietnam. But it is more than a decade since the dismantling of the quota regime that India could not realize the abundant opportunities as other least-cost competitors had overtaken due to competitive cost, price and delivery schedules.
However, the situation in the recent couple of years gives a glimmer of hope and solid ground for optimism as the Ministry of Textiles has become proactively busy in stitching together facilitative measures to impart a leg-up for the textile industry both for domestic consumption and also for exports.
With over 45 million people employed directly and a large swathe of equally high proportions of people get involved indirectly in the value chain of this vital light manufacturing textile industry, India commands comparative advantages and favorable terms of trade in this domain. India’s textile and garment sector was traditionally a leader in the country’s exports in global markets especially to the traditional market of the United States and the 27-member European Union minus the United Kingdom. Being a net exporter of cotton yarn, India has an inherent advantage over competitors such as China and Bangladesh by leveraging its capacity in the pre-garment stage itself by moving up the value chain.
Alive to the need for ensuring dynamic growth of the country’s textile industry and in a bid to scale up both domestic output and export of its textile and clothing, the authorities recently unfurled a unique Rs 6000 crore package to the textile sector in June 2016. This was followed up by policy interventions for made-up sector in December 2016. The package was designed to boost employment generation, investment and to enhance textile exports in apparel sector. The steps include, among others, labour law reform which covers fixed term employment for the apparel sector which would be deemed at par with permanent workman in terms of working hours, wages, allowance and other statutory dues so that the pains of the seasonal nature of the industry would not deter workers coming to contribute their mite to the manufacturing capacity of the industry.
Under Amended Technology Upgradation Fund Scheme(ATUFS), Scheme for Production and Employment Linked Support for Garmenting Units(SPELSGU) was rolled out on July 25, 2016 for apparel sector. This has now been extended to made-up sectors on January 10, 2017. The subsidy provided to apparel and made-up units under Amended-TUFs is being increased from 15 to 25 per cent, giving a push to employment generation. The cap has also been raised to Rs 50 crore. More significantly, subsidy is output-driven and would be disbursed only after the expected jobs are created after a span of three years. Alongside, the provision of 240 days under Section 80 JJAA of the Income Tax Act has been relaxed to 150 days for garment industry effective from September 8, 2016 in view of the seasonal nature of the industry. This provision took prospective effect from April 1, 2017.
In a bid to make exporters feel that they do not get subject to any tax as taxes cannot be exported as per global norms, a new scheme called Scheme for Rebate of State Levies (RoSL) on export of garments has been put in place and notified in August 12, 2016. This meant refund of the State levies which were not refunded so far to exporters. This is over and above the existing duty drawback scheme for which exporters are reimbursed duty borne in import o inputs for export production.
Overall, apart from these recent initiatives, there were also flagship schemes to develop the country’s hoary textile industry that cover, among others, Schemes for the Development of Powerloom clusters, Integrated Scheme for Development of Silk Industry (ISDSI), Comprehensive Handloom Cluster Development Scheme (CHCDS), National Handicrafts Development Programme(NHDP) and the North East Region Textiles Promotion Scheme (NERTPS). There has also been a Scheme for Integrated Textile Parks (SITPS), launched a couple of years ago but has been unobtrusively making rapid strides in recent years. The primary aim of the SITPs is to foster integrated value chains with world class infrastructure at potential growth centres to propel them to a pole position by facilitating the textile sector to realize its full potentials. It aimed at addressing infrastructure constraints on cluster basis and enables the industry to meet global environmental standards, facilitate additional investment and generate job. The scheme is purely industry-driven and the role of the government is limited to part-funding and facilitating. In recent years, the scheme has helped to leverage investment and set up parks with production units and common infrastructure facilities. State governments too are involved in selection process and for various clearances to set up these parks. The Ministry of Textiles has granted Rs 152 crore for development of eight textile parks in various States so far.
Under its output-outcome framework for a spate of schemes for the current fiscal, the Textile Ministry has set apart a massive Rs 3094 crore to kick-start the growth momentum of this important industry for livelihood of millions and also to earn the much-needed foreign exchange through exports of Indian textile and clothing to overseas markets.
In sum, the various ongoing schemes and intense policy interventions would help the domestic textile industry to ensure integrated progress in all its variegated branches of cotton, handlooms, powerlooms, handicrafts, silk and technical textiles, going forward.
*Formerly Deputy Editor, The Hindu Group, the author now works as independent economic journalist and is based in Delhi.
Views expressed in the article are author’s personal.