India is among the world’s largest producers of textile garments. The domestic textile and apparel industry contributes 2 percent to India’s GDP and accounts for 10 percent of industrial production, 27 percent of the country’s foreign exchange inflows and 11 percent of the country’s export earnings. The Textile & garments industry in India is highly diversified with a wide range of segments ranging from products of traditional handloom, handicrafts, wool and silk products to the organized textile industry. The organized textile industry is characterized by the use of capital-intensive technology for mass production of textile products and includes spinning, weaving, processing, apparel, and garment.
The present government would have to rethink its policy on turning around an industry that employs 45 million people and is only second to the agriculture sector in terms of employment, as it continues to gasp for growth. Three years after key regulatory and labor changes were put in place, India’s textile and apparel exports have declined from438.60 billion in 2014 to $37.12 billion in 2018 while imports have increased from $5.85 billion to $7.31. Particularly hit has been the apparel sector, where the time is taken by the industry to adjust to the Goods and Service Tax regime, a downward revision of export incentives, and credit squeeze faced by small and medium scale was
enterprises, has pushed production downwards.
Estimated at $16.2 billion in FY19, India’s apparel exports fell by 1.2 percent from FY18, which in turn was 4 percent lower than the previous year. Even the share of apparel exports in the country’s total textile exports has fallen sharply from 51 percent in FY17 to 45 percent in FY19. Industry experts attribute the fall to the ever-tightening pressure on the export markets by higher shipments from low-cost competitors like Bangladesh and Vietnam. However, the recent slowdown in global demand has also increased competition in the markets which has coincided with taxation changes in India. Barring a few months, apparel exports are continuously mainly due to stiff competition, slowdown, and discontinuation of certain export incentives. Analysts say there was a 6-7 percent impact on costs, which hurt the profitability of garment makers too. “A substantial drop in the import duty observed after implementation of the GST which has encouraged cheaper imports. For imports from Bangladesh, there is a full exemption of basic customs duty and hence Chinese fabric is easily coming to India duty-free through Bangladesh in the form of garments. The Central Board of Indirect Taxes and Customs (CBIC) had slashed duty drawback rates on cotton, man-made and blended garments.
Interestingly, as far as jobs are concerned neither ministry nor industry bodies having requisite data, it is believed that the promised 10 million jobs haven't been created, three years after the imaginatively designed Rs 6,000-crore mega-package for textiles was rolled out. The bulk of the planned capital outlay, about Rs 5,500 crore, was earmarked for an additional 5 percent duty drawback for garments, that is, a refund of duties on imported inputs used to make export goods. The more radical element was the increased government funding for provident funds of new employees. Those earning less than Rs 15,000 per month would be given additional government funding for the first three years on the job.
Therefore, it can be concluded that once the burgeoning textile industry is now grappling with many issues which the government must address at the earliest for stabilizing this industry. Moreover, the government will also have to chalk out new strategies for creating more jobs. Furthermore, the issue of imbalance between import and export should be taken very seriously as India should by now be self-sufficient as far as Textile Industry is concerned.
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