Pol­icy Inputs Re­quired For Fa­cil­i­tat­ing Growth

Mr D K Nair, Ad­vi­sor, CMAI, shares valu­able in­sights on changes needed in Govern­ment Poli­cies that can help the Gar­ment In­dus­try grow.

Apparel - - Contents April 2017 -

Mr D K Nair, Ad­vi­sor, CMAI, shares valu­able in­sights

It is ap­par­ent that the Tex­tile sec­tor as a whole is stag­nat­ing and the rea­sons are both ex­ter­nal and in­ter­nal. There is noth­ing much that we can do on the ex­ter­nal fac­tors ex­cept in the area of mar­ket ac­cess where again the scope is lim­ited. But there are sev­eral in­ter­nal pol­icy is­sues that can be ad­dressed ef­fec­tively if there is po­lit­i­cal will to do so. The pack­age an­nounced in June 2016 for the Gar­ment In­dus­try shows that the cur­rent Govern­ment is will­ing to deal with is­sues that were con­sid­ered taboo un­til re­cently, though most of the de­ci­sions re­lat­ing to labour laws are yet to be no­ti­fied. Per­haps, the time is ripe now for the in­dus­try to de­mand at­ten­tion to some of the ma­jor govern­ment poli­cies that ham­per tex­tile growth in the coun­try.

In­dia has a long tra­di­tion in weav­ing and in the dis­tant past we dom­i­nated the global tex­tiles sce­nario on the strength of our crafts­man­ship. Dur­ing the In­dus­trial Rev­o­lu­tion, tech­nol­ogy stole a march over tra­di­tion in tex­tiles pro­duc­tion for the first time and our dom­i­nance in weav­ing has come down al­most steadily ever since. Com­pet­i­tive­ness in tex­tile pro­duc­tion has trav­elled from coun­try to coun­try dur­ing the last sev­eral decades de­pend­ing on tech­nol­ogy and cost of pro­duc­tion in the re­spec­tive coun­tries. Even af­ter los­ing its tra­di­tion based dom­i­nance, In­dia has been able to re­tain a sig­nif­i­cant pres­ence in the tex­tiles sec­tor over th­ese decades by adopt­ing a blend of tra­di­tion and tech­nol­ogy.

But even coun­tries like Pak­istan, Bangladesh and Sri Lanka which share the same tex­tile her­itage as ours, have been re­ly­ing more on tech­nol­ogy than on tra­di­tion in their tex­tile pro­duc­tion dur­ing the last few decades. And they have all achieved higher growth than ours, es­pe­cially in fab­rics by Pak­istan and in gar­ments by the other two. In In­dia, tech­nol­ogy has played its due role in tex­tiles pro­duc­tion only in the case of spin­ning, where our pro­duc­tion fa­cil­i­ties are truly world class and nearly 90 per cent of pro­duc­tion is in the or­gan­ised sec­tor. In fab­rics, close to 95 per cent of our pro­duc­tion is in the de­cen­tralised sub­sec­tors and in gar­ments and home tex­tiles, over 75 per cent of our units con­tinue in the SME sec­tor.

Govern­ment poli­cies have played a ma­jor role in driv­ing our In­dus­try away from tech­nol­ogy and to­wards tra­di­tion over the decades. Disal­low­ing ca­pac­i­ties in or­gan­ised fab­rics pro­duc­tion through the li­cens­ing sys­tem, en­cour­ag­ing hand pro­cess­ing of fab­rics through duty ex­emp­tion and re­serv­ing the Gar­ment In­dus­try for SSI sec­tor were among the pol­icy in­ter­ven­tions that dis­cour­aged in­vest­ments in or­gan­ised pro­duc­tion for a long time. A skewed ex­cise regime that taxed or­gan­ised pro­duc­tion and ex­empted oth­ers man­u­fac­tur­ing the same prod­ucts also en­cour­aged frag­men­ta­tion. Most of th­ese pol­icy ap­proaches were guided by con­cern for em­ploy­ment gen­er­a­tion, but re­sulted mostly in creat­ing in­ef­fi­cient ca­pac­i­ties and un­der­pro­duc­tive em­ploy­ment, which had an over­all neg­a­tive im­pact on the In­dus­try.

Learn­ing from ex­pe­ri­ence, most of such poli­cies have been rec­ti­fied dur­ing the last few years. And the in­no­va­tive Tech­nol­ogy Upgra­da­tion Fund Scheme launched in 1999 has helped a lot in im­prov­ing the use of tech­nol­ogy. But some ir­ra­tional pol­icy mea­sures still con­tinue. The Hank Yarn Pack­ing Obli­ga­tion Or­der is one of them. It presently man­dates that 40 per cent of cot­ton yarn pro­duced by In­dian mills, ex­clud­ing hosiery yarn and ex­port pro­duc­tion, should be packed on hanks in or­der to en­sure ad­e­quate avail­abil­ity of cot­ton yarn for the hand­looms.

Hank Yarn Obli­ga­tion was in­tro­duced in 1974 at 50 per cent of pro­duc­tion of cot­ton and vis­cose yarn. Vis­cose got ex­empted later, when it went out of the purview of Es­sen­tial Com­modi­ties Act un­der which the Obli­ga­tion is en­forced. The obli­ga­tion on cot­ton spin­ners was re­duced to 40 per cent in 2003 and con­tin­ues so far at the same rate. It is not pos­si­ble to as­sess the ac­tual re­quire­ment of yarn for the hand­loom sec­tor on the ba­sis of pro­duc­tion data for hand­loom fab­rics, since no­body col­lects data on hand­loom fab­rics pro­duc­tion. Govern­ment's data based

Mr D K Nair, Ad­vi­sor, CMAI.

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