The Indian Textile Industry is the second largest producer of textiles and garments in the world. The Government and the industry are now focused on increasing exports to regain lost share to countries like Bangladesh and Vietnam. The Union Budget 2017-18 released on 1st February 2017 is certainly a boost in the right direction.

With an economic growth of 7.5%, and a population of about 1.34 billion, India is one of the most attractive markets worldwide, with a very high demand for textile and apparel. The Union budget 2017-18 seems promising for the Textile Sector.  While the allocation to the textile ministry is similar to the previous year, the share for textile infrastructure has been increased by about three times to $280 million in 2017-2018 from $75 million in 2016-2017. This allocation will be utilized for building textile parks, incubation facilities, processing and development centres. The funds will also be used to promote employment in the sector and skill development that will enhance manufacturing. This budget is completely focused on improved infrastructure which will encourage domestic textile manufacturing, make exports competitive and help create the required logistics for the special textile package announced last year.

The Indian Union Government focuses on improving export infrastructure with a new restructured central scheme – Trade Infrastructure for Export Scheme (TIES), which will be launched in 2017-2018.  Indian exporters face challenges to keep the cost competitive due to insufficient infrastructure that increases transaction costs.  This scheme will be an important step towards modernization like last mile connectivity to ports, testing labs and certification centres. “Infrastructural development will not only boost the domestic textile market, but will also ease the exports by reducing logistics costs,” said Ajay Sahay from Federation of Indian Export Organisations.

Maximum employment in India’s textile industry is generated by micro, small and medium enterprises (MSMEs). This sector, which was hit hard by the demonitisation in the last quarter, will benefit from the reduction in corporate tax from 30% to 25% for industries with a turnover up to $7.5 million. Additionally, reduction in the income tax rate for individuals in the low-mid income slab will leave more disposable income in the hands of the people and will enhance consumption demand in the economy.

The Textile Industry also seeks the lowest duty slab of 5% without exemptions under the awaited Goods and Service Tax (GST) regime expected to be implemented in July 2017. This if accepted will further support growth of the industry. Some states Governments are also doing their part to promote the industry. The state Government of Haryana, keen to make the state a global textile manufacturing hub and investment destination, has drafted a new textile policy to incentivize setting-up new manufacturing facilities and ensure technology modernization of existing facilities. The Madhya Pradesh state Government will also soon release a special policy to encourage garment industry.

With a current estimated size of $96 billion of global home textile market and a huge potential for further growth, India can outperform China in the coming years. Though the potential for growth is mainly supported by the domestic market, the industry is now all set to focus on increasing exports and becoming competitive in the global market.

To read the latest news on the Textile Industry in India click Textile Newsletter.