INDIA: Advantage…textiles!

(By H. K. Taparia)

MUMBAI: The Indian textile industry, which has a tradition of over 5000 years, is on the verge of creating history. The journey from being a colonial master's converter to becoming a nerve centre for outsourcing, essentially captures the survival instincts of Indian textile. Indian textile enjoyed certain inherent traditional advantages and same continue till date and probably this is one factor which helps the country command respect in global trade circles.

The Finance Minister, Mr. P. Chidambaram, has also recognized that nurturing the textile industry will further strengthen and leverage its existing advantages.

The 2005 budget had in store a series of fiscal and capital incentives for the sector. Indeed, the latest budget makes Indian textile a little bit more competitive vis-a-vis the powerful Chinese textile machine. In the handloom and powerloom segments the investment has been increased. The continuation and enhancement of the TUFS is also welcomed by the industry. The Cluster Development Approach would also boost development. The independent texturisers too have been offered the optional CENVAT route.

The FM focussed on textiles in the light of the post-quota regime. But it's FM's bigger effort to boost domestic textile consumption and put the sector on a global footing that stands out. This was seen as important in the context of the end of the international quota regime in textiles from January 1, 2005, and the huge potential India has under the new open market regime.

The Common Minimum Programme of the United Progressive Alliance (UPA) had promised to legislate an employment guarantee for the rural unemployed. The FM vision that textiles will generate 1.2 crore jobs till 2009 has confirmed that the UPA government sees the textile industry as its major vehicle to fulfill its promises in the CMP.

In addition to high excise duty, the Government has been consistently levying high customs duty on manmade fibres. Following upon his move last year to withdraw excise duties across the cotton textile chain, the FM has made some major changes in the man-made fibre segment. The FM has now reduced the duty on polyester filament yarn. However, this does not bring the much needed parity between man-made textiles and cotton textiles because of the mandatory duty of 16% payable on all man-made fibres and Filament Yarns which is present in blended and synthetic fabrics. While the natural fibre stream of textile production will continue to enjoy excise exemption, the request of the man-made textile sector for a level playing field has been ignored to a large extent.

The Sathyam Committee Report, based on which Textile Policy 2000 was prepared, had outlined the agenda for improving the weaving and processing facilities in the country. Now the FM has announced a 10% capital subsidy on machinery for the processing sector. The proliferation of manufacturing capacity in the country can be attributed to outdated labour laws. In addition, the low labour cost theory is a myth as productivity levels are way below those of competitors.

The FM fails to address this major concern of not just textiles but other sectors as well. Perhaps the FM thought it would be too much taking on the labour reforms along with implementing nationwide VAT from April 1st 2005, in the face of resistance from some states. The removal of reservation for small scale units in hosiery and other products will stimulate investment in the sector. All this and the insurance schemes for weavers and labourers, the Skills Development Initiative and the increase in ceiling of turnover for SSIs will go a long way in helping the Indian Tiger dominate the Dragons of the trade.


March 01, 2005

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Added: March 1, 2005
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