Tex­tile and ap­parel in­dus­try BUD­GET - A Mixed Bag

- A Mixed Bag

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The In­dian ap­parel and tex­tile sec­tor re­ceived a 19% raise (Rs. 897 crore) in the Union Bud­get 2018-19. Dur­ing his marathon bud­get speech, In­dian Fi­nance Min­is­ter Arun Jait­ley said, “The bud­get has pro­vided an out­lay of Rs. 7,148 crore for the tex­tile sec­tor in 2018-19, which is ex­pected to boost ex­ports.”

Although the ex­port booster in the bud­get has re­ceived a mixed bag of re­ac­tions from the in­dus­try, the feed­back is pre­dom­i­nantly pos­i­tive. The gen­eral feel­ing that pre­vails is that the spe­cial pack­age will help in re­vers­ing the steadily de­clin­ing ex­port growth pat­tern of last year. The in­dus­try hopes the bud­get will push the growth of the do­mes­tic mar­ket, which flat-lined last fis­cal due to var­i­ous gov­ern­ment poli­cies.

In the cur­rent bud­get, the gov­ern­ment has ap­proved a com­pre­hen­sive tex­tile sec­tor pack­age of Rs. 7,148 crore for 2018-19, with a pur­pose to boost the ap­parel and madeup seg­ments. The pack­age out­lay was

Rs. 6,000 crore in the last fi­nan­cial year.

Re­act­ing to the bud­get, in­dus­try ex­perts hoped that the in­creased fund­ing al­lo­cated for

the tex­tile sec­tor would cover fab­ric un­der the Re­bate on State Levies (ROSL). A break­down of the bud­get in­di­cates that the al­lo­ca­tion for ROSL has been in­creased from Rs. 1,855 crore to Rs. 2,164 crore. The raise is ex­pected to help the ex­porters of made-ups and ap­parel, as the back­log will be cleared and work­ing cap­i­tal re­leased. How­ever, there are also ap­pre­hen­sions be­cause the ac­tual back­log wait­ing to be cleared is in the range of Rs. 5,000 crore.

The ex­perts also stated that an eq­ui­table bud­getary al­lo­ca­tion could help im­prove com­pet­i­tive­ness of In­dian tex­tile ex­porters in the in­ter­na­tional mar­kets and im­prove In­dia’s tex­tile ex­ports growth.

In the bud­get, the gov­ern­ment has also in­creased the fund al­lo­ca­tion for the Tech­nol­ogy Upgra­da­tion Fund

(TUF) Scheme from Rs. 2,013 crore in 2017-18 to Rs. 2,300 crore. The ex­perts term this a pos­i­tive move, as it would help in clear­ing some of the com­mit­ted li­a­bil­i­ties un­der TUFS.

Many within the in­dus­try also be­lieve that the Ba­sic Cus­tom Duty (BCD) in­crease on silk fab­ric- al­beit neg­li­gi­ble from 10 to 20% would save the in­dus­try from dump­ing by China. Af­ter the im­ple­men­ta­tion of GST, the in­dus­try had been fac­ing higher im­ports across the value added seg­ment and was seek­ing a con­sid­er­able in­crease in BCD across yarn and fab­ric.

In an of­fi­cial state­ment, Rahul

Me­hta, Pres­i­dent, Cloth­ing Man­u­fac­tur­ers As­so­ci­a­tion of In­dia (CMAI) said the gen­eral fo­cus of the bud­get was on ru­ral econ­omy, which in­cluded sig­nif­i­cant fund al­lo­ca­tions and which would help in push­ing up de­mand for ap­parel in the do­mes­tic mar­ket.

He also pointed out that the en­hanced eco­nomic growth en­vis­aged in the bud­get would also help in im­prov­ing de­mand for ap­parel, which is one of the pri­mary needs of the masses. More­over, the pos­i­tive im­pact of the bud­get on the ap­parel in­dus­try would also be re­flected in job cre­ation, since the in­dus­try is the most labour in­ten­sive sec­tor in the coun­try. In fact, the In­dian tex­tile in­dus­try is one of the largest sources of em­ploy­ment in In­dia, pro­vid­ing di­rect em­ploy­ment to ap­prox­i­mately 4.5 crore peo­ple and cre­at­ing in­di­rect job op­por­tu­ni­ties for nearly two crore in the sec­tor. The in­dus­try also plays a cru­cial role in the In­dian econ­omy with its con­tri­bu­tion of 14% to the over­all in­dus­trial pro­duc­tion and four per­cent to the Gross Do­mes­tic Prod­uct (GDP) of the na­tion.

Fur­ther­more, there also are mixed feel­ings about the drop in the cor­po­rate tax for units with an an­nual turnover of Rs. 250 crore. The gov­ern­ment has also an­nounced within the bud­get a big thrust to Medium, Small and Mi­cro En­ter­prises (MSMES) to boost em­ploy­ment and eco­nomic growth. In or­der to re­duce the tax bur­den on MSMES, the cor­po­rate tax has been re­duced to 25% for those units that have re­ported turnover up to Rs. 250 crore. The move is sup­posed to ben­e­fit 99% of the tex­tile sec­tor, as it is pri­mar­ily in the MSME seg­ment.

The in­dus­try has wel­comed the ex­ten­sion of fixed term em­ploy­ment for all seg­ments, in­clud­ing tex­tile leather and footwear, which ear­lier was only for ap­parel and made-ups. Be­sides, the con­tri­bu­tion of 12% to em­ploy­ees Prov­i­dent Fund (EPF) of new em­ploy­ees for first 3 years has re­ceived much ap­pre­ci­a­tion by the in­dus­try.

How­ever, the sec­tor has sev­eral lim­i­ta­tions aris­ing due to in­fras­truc­tural draw­backs and dis­persed value chain. It is be­lieved that con­tin­ued fund­ing al­lo­ca­tions to­wards tex­tile parks, fi­nan­cial as­sis­tance, and ac­cess to ap­pro­pri­ate in­fra­struc­ture can aug­ment sec­toral ef­fi­cien­cies. This, in turn, can help en­hance the sec­tor’s con­tri­bu­tion to the coun­try’s man­u­fac­tur­ing pro­duc­tion as well as to its GDP.

Note: only fund al­lo­ca­tions to ma­jor heads are shown

To­tal bud­get al­lo­ca­tion to the Tex­tile Min­istry has been in­creased to Rs. 7148 crores for 2018-19 from Rs. 6251 crores (1 Crore = 10 Mil­lion).

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