Textile Sector

India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries

It employs large number of people (Second largest after agriculture)

It has huge share in India’s export (11% of India’s total exports; US$ 40 billion; 13% of world production of textiles)

It contributes approximately 5% to India’s Gross Domestic Product (GDP), and 14% to overall Index of Industrial Production (IIP).

It has strong backword and forward linkages

Textile industry in India is one of the few sectors, which is truly competitive world-wide

India has a strong manufacturing base for variety of textile products, particularly cotton textile items of raw materials, trained manpower in manufacturing

Government policy has restricted technical upgradation and capacity expansion. It was restricted to small scale industry category only.

While India’s competitors built up massive capacities to meet global demand, India was stuck with debilitating rules and regulations

Rigidities in the labour market

Import restrictions on competing man-made fibres

Export quotas on cotton and logistics costs

Textile industry is facing slowdown, which is affecting sector’s ability to keep large no. of workers employed and also in providing employment to fresh manpower

India’s exports dropped by 2.4 per cent from 2014-15

The high price of domestic cotton, coupled with heavy duties on import of cheaper Chinese varieties, also hampered production of cotton goods

Between 2009 and 2015, the domestic market grew 10% every year for the Indian textile and clothing sector, and exports rose almost 8% year-on-year. For the last three years, exports have almost stagnated. Countries such as Vietnam have overtaken India in yarn exports to China.

When the global economic slowdown hit the industry seven years ago, the Centre had come out with a time-bound stimulus package. The two major policy decisions of the government in the recent past, demonetisation and GST, have impacted the industry more than the economic slowdown.

Government has specific schemes for the sector like TUFS and Amended TUFS

Government has  announced a Rs.6,000-crore special package for the textile and apparel sector with an aim to:

Additional incentives for duty drawback scheme for garments

Flexibility in labour laws to increase productivity

Government has allowed 100% FDI in the Indian textiles sector under the automatic route.

Several tax breaks and production incentives

It aims to help in creating one crore jobs, mostly for women, in the next three years

The package breaks new ground in moving from input-based to outcome-based incentives; a unique feature of the scheme will be to disburse subsidy only after expected jobs have been created

To ensure increased earnings for workers, the package specifies that overtime hours for workers shall not to exceed eight hours per week — in line with International Labour Organisation norms

China, like most countries before it such as Japan or Korea, has reached a stage where factor costs have increased and this is forcing it to opt for more technology-intensive methods.

India, with labour costs still low, has a decade in hand, at best. India must quickly improve its infrastructure — ports, roads, electricity — to ensure that these new measures come to fruition