Strengths and Weaknesses of Indian Textile Sector

Strengths and Weaknesses of Indian Textile Sector

Question: Development Commissioner for Handlooms, Ministry of Textiles, Government of India recently launched the revamped website of Handloom Export Promotion Council, www.hepcindia.com. Discuss the main strengths and weaknesses of the Indian Textile Industry.

Strengths

• Nation’s textile industry has potential to double its rise in the next 7 years; China is losing advantage in textile because of rising power costs, labour costs and focus on domestic market

• Major exporting countries like Bangladesh are also facing geopolitical issues

• Country’s major costs such as cotton, yarn, power, wages, dyes and chemicals are internationally competitive

• Make in India campaign covering 25 sectors including the textile and garment industry has been launched

• It has put logistics and systems in place to address concerns of potential investors

• GoI also allows 100% FDI through the automatic route in the textile sector
• Through ‘Make in India’ initiative, investment opportunities for foreign companies and entrepreneurs are present across the complete value chain of synthetics, value-added and specialty fabrics, fabric processing set-ups for the following:

- Natural and synthetic textiles,
- Technical textiles,
- Garments, and
- Retail brands.

• Technology Upgradation Fund Scheme launched in 1999 has also given a major boost to this sector; the scheme is continuing through the 12th plan with a massive focus on power looms

• SIDBI is working for SSI in textile and cotton ginning and pressing sector.

• The TUFS scheme aims at making available funds to the domestic textile industry for technology up-gradation and setting up of new units

• Total Budget Outlay for continuation of scheme is around INR 11,900 crore from which 2400 crore has been allocated for 2013-2014

• Scheme aims to generate 11.5 % annual growth in volume terms in cloth production and 15% in value exports by increasing domestic value addition and technological depth and enhancing global competitiveness

Weaknesses

• Preferential tax regime whereby the textile sector has not received its due under the FTP despite being one of the biggest job providers in the nation

• Huge tariff barriers are faced by the industry on account of preferential tariff arrangements

• Duty sops of only 2% were given to mainstream cotton textile products, whereas higher rates were given for handlooms, carpets, coir products under the merchandise exports from India scheme (MEIS)

• Man made textile industry that is highly capital intensive and can attract FDI has been discriminated against through the cotton industry; liberal MEIS benefit under FTP has not been granted to this sector

• MMF textiles generate INR 7000 crore as taxes and are suited to the new FTP scheme; these products have been given lower incentives compared to cotton textiles

• Benefits for exporting textiles in major emerging markets for MMF textiles have been stopped in the new FTP

• Old machines, more than 10 years old, especially in the weaving sector is another problem plaguing the industry. While the global textile industry is advancing technologically, local textile industry still relies on import of second hand textile machineries
• Rigid labour laws have stymied the growth of the sector where labour involvement is maximum

• Lack of economies of scale and paucity of large manufacturing capacities is also a weakness of the Indian textile sector

Facts and Stats

• Indian textile industry contributes to the national economy through direct as well as indirect employment generation and net forex earnings

• Sector contributes 14% to industrial production and 4% to the GDP

• It constitutes 27% of the nation’s foreign exchange inflows

• It provides direct employment to over 45 million persons

• It is the second largest provider of jobs after the agricultural sector in India

• India is the second largest producer of textiles and garments in the world

• The Indian textile industry’s total cloth production has increased by 2.5 percent during April-February, 2015 as compared to the same period the previous year