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.
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.