Textile and apparel industry BUDGET - A Mixed Bag
- A Mixed Bag
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).