25 Nov 2019
The textiles and apparel industry is one of the largest employers in India’s manufacturing sector, employing over 45 million workers. Given the intrinsic labor-intensive nature of textiles manufacturing, this sector holds tremendous potential for future employment which could go up to 62 million by 2022 with an estimated addition of 17 million more workers in the next four years.
With some key measures to support this industry, the recent decline in production and exports could turn into a big leap of growth.
1. It is critical to address the anomalies in duties and tax structures that have led to the increase in cost of production, making this industry uncompetitive. At present, Indian cotton yarn and fabric sectors are struggling on the export front due to the high incidence of block/embedded taxes and levies/surcharge of over 6%, in comparison to their counterparts in other countries. In order to make Indian fiber, yarn and fabric exports competitive, the RoSTCL benefits should be extended to the entire value chain. (These are at present only offered for apparel and made-ups businesses.)
Also, the textiles industry (especially the fabric sector) is struggling to avail credit of input GST on services like contractual manpower, repair and maintenance. Further, a majority of dyes and chemicals attract 18% GST rate owing to 5% GST on fabric output. The Government should devise a suitable mechanism for refund of GST credit accumulation for these key items.
2. The Government needs to speed up finalizing free trade agreements (FTAs) with major markets, and also explore new markets. The EU FTA is critical for this industry. India has a 9.6% duty disadvantage compared to other exporting countries. Furthermore, the introduction of WTO-compliant export incentives will help India’s textiles and apparel industry continue its contribution to exports.
Also, it is important to review the Rules of Origin Law under the SAFTA Agreement to arrest imports from Bangladesh.
3. Worldwide, the demand is moving towards man- made fibers (MMF). However, the high price of raw materials for Indian MMF textiles is one of the major reasons for the low penetration of our synthetic textiles in both domestic and export markets. The MMF and man-made filaments and yarns (MMFY) segments are highly competitive the world over, and India is no exception. Hence our manufacturers mostly work on very thin margins.
CII recommends a reduction in GST on man-made fiber raw materials such as PTA (HS code 29173600) and MEG (HS code 29053100) from the present 18% to at least 12%, if not 5%, and a reduction in GST on synthetic (man-made) fiber (HS code 5503 2000) from 18% to 12%.
4. There is a need to extend financial help for modernization of machinery, particularly in the spinning sector. The TUFS guidelines need to be simplified and there should be effective clearance of all pending subsidies in a time-bound manner.
5. It is important to build large-scale facilities to attract the industry shifting base from China. India needs to introduce the cluster development process and provide common facilities for lab testing, skill training, sampling, incubation centers for product development, engagement with local craftsmen for design fusion, etc. The cost of power and electricity in India is high due to cross-subsidies, inefficiencies, and wheeling charges. The needs to be addressed.
6. The garment industry is time-sensitive. It is vital for suppliers to reduce the lead time. It is essential to strategically provide seamless logistics, better infrastructure and streamlined regulatory process to exporters. Required infrastructure needs to be constructed for shipping lines for carrying cargo. The 24*7 facility at sea ports needs to be improved and mother vessels should be made available at least two times a week. Further, the number of ports providing these mother vessels also needs to increase.