India’s textile and clothing industry can play needed pivotal role with the target of increasing its turnover and size to USD 300-350 Billion in next 4-5 years.
In this context India s national Budget of 01 Feb 2021, has come is as a true saviour and engine for Textile and clothing industry to drive export earnings.
A Review of Budget snippets and Implications for India s Textile Industry
Some of the key areas and issues addressed for India’s Textile and clothing industry in the 01 Feb National Budget are to be understood as per below:
1. There has been a rationalization of import duties on Synthetic raw materials, and esp. for reducing the BCD _Basic Customs Duty to 5% level on Nylon chips, fiber and yarns. This will create level playing field for the Nylon sector and especially help the lagging MMF industry in key hubs of Surat and south India to produce MMF textiles at internationally competitive prices and help increase export share amidst the growing demand for MMF textiles for active and sportwear.
However, textile industry s demand for uniform GST structure, and abolishing ADD (Anti-Dumping Duty) on VSF/VFY materials for manmade textile value chain to boost the consumption of such MMF materials yet remains an issue for the manufacturers of MMF textiles that have increasing demand from the sportwear and fashionwear.
2. The above move along with abolition of ADD-Anti Dumping Duty on PTA [the basic RM for polyester value chain] will lead to enhancing the export of Manmade textiles from India and help grow India’s Textile industry size to $300 to $350 Billion, and also increase its share in global exports from present day 5 % to about 7% by 2024; and to slot India amongst first 5 exporters of T & C via improving share of India’s MMF exports. This will address the long pending demand of MMF sector.
3. The reduction in BCD for Nylon raw materials, and abolition of ADD on polyester basic RM/PTA, will help India’s downstream Textile/fabric and garment sectors to be internationally competitive and gain more export share in the non-cotton T&C sector which commands large volumes
Other 6 keys areas of Budget support for India s textile sector are summarised below for the new/additional benefits doled in the Budget
A] Provision of funds of approx. Rs 1450 Crore, [that is INR 14500 Million] for NTTM (National Technical Textile Mission) over the years 2021 to 2024.This allocation will help Indian Tech Textile sector to replace and offset imports worth $ 16 billion, with Indeg. Tech -tex/non-woven textiles, for high tech and advanced technical textiles & industrial en uses like industrial and infrastructure /geo- Textiles.
B] New Budget allocation has been provided to create 7 no. global size Mega Textile Parks, of 1000 Acre plus in the country over the next 3 years. This will help attract FDI from global textile investors and MNC brand and provide world class and competitive infrastructure.
C] The ATUF_ Amended TUF scheme budgetary allocation gets extended to Rs 700 Crores, that is INR 7000 Million vis a vis past allocation of only Rs 5000 Mln. This will catapult investment in fabric and apparel sectors.
D] In addition to the expanded budget for the ATUF scheme, a provision of Rs 100 Crore [INR 1000 Million] been provided for the ISSD (Integrated Scheme for Skill Development) and will help towards creating skilled workforce for Iot 4.0 and automation led textile industry.
E] Towards enhancing the stuck-up working capital needs of the industry, the Budget has cleared `digital` refund to the textile exporters of duties and levies [that is central and state level taxes], under the Ro DTEP scheme.
F] The budget 2021 has also cleared the long standing demand for working of `women workers` in the night shift; with reduction of Compliance burden and, with easy registration/licencing via online procedures.
The one area with mixed impact and concerns seems to be increase on import duty on Cottons to 10%, from earlier level of 5%. Unless the CCI in India plays the balancing act; there is risk of cotton states increasing the price of cotton, to please their farmers lobby, and which will upset the apple cart of RM input prices for yarn/fabric mills.
It seems the 4-5 main wish list of the Indian Textile industry have been duly addressed in the recent budget 2021. Also, with setting up of global scale textile manufacturing complexes/Mega Textile Parks; the one missing area that yet remains will be a true blessing and game changer will be to forge dedicated FTA agreements with EU, the UK, Japan and possibly USA and thus offset price competition with Vietnam & B. Desh .
Another thorn in the bush in terms of direct/irregular exports of Chinese textiles via Nepal/B. Desh routing will now be reduced and controlled with introduction of `Country of Origin` tags for imported textiles and apparels with low pricing vis a vis domestic apparel.