India is well known for its original and traditional textile and apparel. The Textile sector is forecasted to reach $223 billion by 2021. The Textile and apparel industry together employ 105 million people directly and indirectly and will probably create an additional 50 million jobs by 2025. Many states have already initiated plans for additional growth in the Textile Industry. Under the ‘Make in Maharashtra’ initiative, the State Government is working on a niche policy to promote investments in the sector and will also focus on setting up garment and apparel units in cotton-producing regions of the State. In Uttarakhand, the development of two Textile parks as hubs for weavers has been approved. The Government of Telangana plans to develop India’s largest Textile park in the Warangal district.
The production of man-made fibre has seen an upward trend since 2009. Textile exports are one of the main revenue generators accounting for 11% of the country’s exports. However, Textile exports did experience a decline in value in FY 2016 due to lower fibre prices and lower raw-cotton exports. How are the Indian Government’s plans to turn around this situation?
Textile exports saw a decline in FY 2016, but are forecasted to grow by 6% this fiscal year. This turnaround should come from increased fibre prices and export competitiveness which is supported by the new special financial package for the Textile industry. The Union Government announced its approval for the Textile package in June which was an initiative by the Textile Ministry. It aims to increase exports and generate employment in the sector by providing flexibility in labour laws, which will in turn enhance productivity in the sector. It should also help recoup some of the market share that India recently lost to China, Vietnam and Bangladesh.
This package for the garment sector is worth $894 million. The Textile Ministry has already initiated talks with the Labour Ministry in June for extending the labour reforms to the other Textile sectors of yarns, made-ups and fabrics. This extension could in consequence enable India to capture the space created by China due to rising wages which has affected China’s cost benefit. The changes which have been specifically made for the garment sector in this package include an increase in overtime hours limit for willing workers and introduction of fixed-term employment. Implementation of this package is expected to generate $30 billion additional exports, therefore exceeding current estimates, and $11 billion worth investment in the sector in the next three years.
The package will also help to realize the Government’s aim of creating 10 million new jobs in the Textile industry in the next three years. Textile secretary Rashmi Verma stated that there is a large employment potential in the sector, especially for women, who are the dominant workforce in Textiles. The Government will also bear the entire 12% of employer’s contribution to the Employers Provident Fund for the first three years for new workers earning less than USD 225 per month. This should relieve costs to employers who eventually can invest in more people. Due to the increase in overtime limit (maximum of 8 hours per week), workers will, by the Government’s plan, be able to earn more money. In addition, the garment sector will be allowed to employ people on fixed-term basis, considering the garment industry’s seasonal nature.
Within the package, the Textile Ministry will give companies additional duty drawbacks for State level taxes which were earlier confined only to Central level taxes. This will make Indian garments internationally more competitive and generate more exports, as some other countries, such as Bangladesh and Pakistan, already have a duty free regime offer from Europe for the sector.
With the passage of the GST bill in India, the Indian Texpreneurs Federation (ITF), an apex body of Textile sector, expressed confidence about the positive impacts of GST on exports growth and overall economy. Industry executives expect GST to remove the current disparity of excise duty between cotton and man-made fibre and predict a GST rate of around 15% for textile and garments.
Considering the Government`s effort, India is expected to again surpass Bangladesh and Vietnam in garment exports in the next three years. Both these countries overtook India in 2003 and 2011 respectively in exports, even though India has an established value chain in the Textile sector from fibre to apparel manufacturing. Investments in the Textile industry in India are also promising. AEPC (Apparel Export Promotion Council) forecasts investments worth $747.6 million in FY 2017. If India invests more in up-gradation of technology in the sector in the upcoming years, it will have a good chance to be a strong competitor for China, the world’s largest exporter of garments.
Overall, the package will give the Indian Textile Industry the much needed attention which will impact the sector in generating more gainful employment, increase exports, as well as strengthen India’s global position in the Textile Industry.
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