CHENNAI: The textile sector nearly hit a standstill during the first few weeks after Prime Minister Narendra Modi announced demonetisation. Many small garment units were unable to pay wages to workers and production, according to industry players, was affected by as much as half in some areas. However, with the situation improving steadily and the Union Budget coming up, the industry is optimistic about the year ahead. What Arun Jaitley announces on February 1 will determine whether the industry’s optimism is warranted.
According to A Sakthivel, chairman, Federation of Indian Export Organisations and textile industry veteran, the industry does not expect too many sops from the Union Budget. “There was a big `6,006 crore special package that was announced for the textiles sector in June last year. So we do not expect any major sops from the budget. The two key demands from the industry, submitted to the government, concerns the Goods and Services Tax (GST),” he pointed out.
The industry is lobbying hard, say analysts, to get the government to exempt exporters from the tax. “Another issue is that we transport a lot of products right through production. Something goes for printing outside of the primary factory, then comes back. We want this movement of goods to be exempt from the tax as well,” pointed out Sakthivel.
Others however, have more specific suggestions on what the government’s, and the budget’s, thrust should be on. V D Zope, chairman of The Textile Association (India), stressed that more focus needs to be put on the garments segment in particular, to boost exports. “The thrust should be on garments and we should also push for more polyester cotton consumption,” he said.
But more important is what Jaitley is expected to give to exporters. According to Vope, it is the export section of the industry that focus needs to be on. “We need to incentivise exports more. Our industry is primarily export driven and not on domestic consumption. We already have enough inventory here,” he said.
Manickam Ramaswamy, chairman and managing director of Loyal Textiles, also pointed out that the sector needs the government to even out the playing field as far as exporters are concerned. “This is not something that the Budget can address. But it is a pressing issue.
The Indian textile industry is burdened by customs duties we have to pay while exporting to most European markets. But our competitors, from everywhere in South and South East Asia, have negotiated for and got zero duty. The Commerce Ministry needs to address this issue. One or two sops from the budget will not help,” he pointed out.
The FIEO, which has a significant percentage of textile industry representatives, has also submitted a wishlist to the government that includes a demand to increase the limit under Credit Linked Capital Subsidy Scheme (CLCSS). “CLCSS has helped the small scale sector to modernize and expand their production. The CLCSS limit was fixed at `1 Cr about a decade back and therefore, the limit under CLCSS may be enhanced from `1 crore to `5 rore,” suggested the organisation.
The increase in the CLCSS limit would have a direct, positive impact on the sector, according to experts, since many textile units are small firms who are already beneficiaries. FIEO has also pointed out that countries across the world are supporting aggressive marketing to get limited orders available globally with the slowdown in global trade.
“The Government,” said the body, “should create an Export Development Fund for aggressive marketing particularly for MSME by providing a corpus of about 0.5 per cent of previous year exports as the present support through marketing scheme is inadequate.”