Every lobby is working overtime to get some pie in the UnionBudget and the newspapers and periodicals are full of long lists of demands andexpectations, based on even longer lists of the reasons, on which their demandsand expectations are based. The Indian textile and garment industry has evenmore reasons than other industries to have valid expectations from the Budget.But will that be granted is indeed a billion dollar question.


While there are several people, who speak or write aboutwhat the Government would do for them, but those who can speak and write as towhat the Government will not be doing, would be a rare specie. In fact, it isnot very difficult to work out as to what the Government will do or will notdo, if one were to objectively analyze the straws in the wind.


Let me state that the Union Budget for 2010-11 will notprovide any relief to the textile and garment sector and I would not thereforedwell on what different trade bodies are making their long representations tothe Government.


If our recent experience is any guide, anyone would rue forthe total loss of any consideration that should be given to the textile andgarment sector, to day, particularly when one recalls the place of importancethat the textile and garment sector enjoyed in the annual Budget. There hasalways been a specific sub-chapter on this sector in every Budget presentationand this was started and maintained not by anybody other than by the Governmentformed or led by Indian National Congress, which continues to have thosestalwarts at the helm of affairs, as they are today. It is a known fact thatthere has been a TOTAL ABSENCE, WHICH LOOKS LIKE AN UNSPOKEN OR UNWRITTENOFFICIAL BAN, on use of the words like textiles and garments ever since thepresent dispensation headed by Congress has taken over the reign of CentralGovernment.


I distinctly remember that there was always a sense ofexpectation from the Budget as to how kindly or unkindly it is going to treatthe textile and garment sector, which did find a place of honour, in theBudgetary exercise made each year, year after year. But this is no longer now.


This is particularly sad and unfortunate at a time, when ourtextile and garment, having so very much potential of growth both within andoutside the frontiers of the country has been left out in the cold, when theneed to prop this industry was never greater than today. Our exports oftextiles and garments have consistently been going down, a few hic-ups apart,and this does not seem to be the business or even distant concern of theGovernment.


There have been several occasions when the Government withsimilar or same leadership had been extending their helping hand to textile andgarment sector, whenever the circumstances do warranted, but no longer now.


It is not that the Government is not aware of thestatistical figures of consistent decline of textile and garment sector orproblems being faced by the textile and garment exporters. I do not think thatall trade bodies whether it is Confederation of Indian Textile Industry (CITI)or Apparel Export Promotion Council (AEPC) or even the lesser organizationslike Garment Exporters Association (GEA), Clothing Manufacturers Association ofIndia (CMAI) or Apparel Exporters & Manufacturers Association (AEMA) havenot been doing their job of creating awareness in the Government. I have hadthe occasion of looking at the appeals and the presentations that have beenmade by these organizations to the Government-and each of which, I, as anobjective observer, felt every time that more than valid case has been madetime and again by these organizations to the Government on each of the severalissues, which confront the trade and industry every time. But there has been noresponse.


Why so?


The issues that confront the T&C industry, includingexports, are too numerous and have been repeated so many times by so manyorganizations on so many occasions that it is incredible to think that theGovernment is perhaps not aware of these problems. Year after year, pre-Budgetrounds of discussions (or its faade) have been held, which were meant for theGovernment to listen, reason out and then consider including theserecommendations in the Budget proposals.


Or


Are theissues, confronting the T&C industry fake? Are the problems being faced bythis industry a self-created delusion? Are the demands of the industry notbased on facts and figures that merit serious consideration and even inclusionin the Budget proposal?


Let us give the Devil more than its due. Let us have a quick-and a hard look on the issues, confronting the textile and clothing industry and see how far the demands being made by T&C industry, in the context of Budget exercise, are compatible to the growth requirements of T&C sector, without being indulgent to the industry.


Exporting Taxes


There has been a constant stream of assurances by the earlier, ebullient Minister of Commerce, Kamal Nath that the Government of India is against exporting taxes, which is inevitable when the exporters are taxed and this gets reflected in the prices they quote to their buyers. This does push up the costs and therefore the quotations of exporters to the foreign buyers, who get much cheaper rates from several of our immediate and even distant neighours for the simple reason that those countries get the maximum support from their Government.


The Government has been announcing some concessions, in piece-meal, on some of the services, which were utterly inadequate to the demands of the time or requirements of the industry, but this was done with a view to earning some brownie points for itself. The Government has failed to view the issues confronting T&C industry in the right, development prospective. The Government of the day needs to explain if it has undertaken any comparison of taxes being levied on Indian textile and garment exporters with their counterparts in the competing economies?


Or can the Government say that they are not aware of the ground realities on the matter of taxing exporters, which render our products costlier than our competitors; and therefore we stand edged out on the grounds of higher prices? Or the Government should state categorically and on the basis of well-documented arguments that our T&C exporters are not being treated unequally or even harshly by our own Government as compared to their counterparts in the developing economies and not-longer-developing country like China, which is the largest garment exporter in the world today.


Short conclusion: The Governments credibility is extremely low.


Labour Laws


We seem to be living in pre-British era, in so far as the labour laws are concerned. It has repeatedly been made out by the various trade bodies that these laws need to be changed to be in tune with the present day requirements of manufactures and exporters. The promises have repeatedly been made both by the Labour Minister as also by Commerce Minister with reference to garment exporters requirement that the Government of India is committed to amend the labour laws, which should provide for temporary labour requirements of exporters. But nothing, just nothing, has been done on this important front.


Earlier, the Government has been expressing their helplessness in bring up such labour legislation, as its survival depended vitally on the Left parties, whose support was critical and crucial for the Government to survive. But that argument is no longer valid, once the Left withdrew its support and the Government did not fall. In its second carnation, UPA-II is without any Left strings and can bring in the legislation to suitably alter the labour laws of the country, which should find support from their non-Left allies. And yet, there are no signs of any amendment of labour laws.


Short conclusion: The Government is seized of some unknown and unspoken fears, which are non-existent. Credibility of the Government: Very low.


Cotton Exports


The T&C industry has been clamouring for fair prices of cotton-both for farmers and the textile mills, which is feasible. The industry has made several representations to each and every authority in the Government who is concerned with the issue that (i) textile mills may be provided with adequate funds at cheaper rates to purchase the required quantity of cotton at most appropriate time, and (ii) regulate exports of cotton. These demands were reasonable and well-based, as in the present case, cotton buyers from other countries generally buy up most of the better quality cotton with the cheaper funding from foreign sources and exporting the same to our competing economies like Bangladesh at much cheaper rates than at what prices our textile mills can purchase.


 

How much does the Government care for adequacy of local availability of cotton to our textile mills is seriously reflected in the fact that for years together, the Government did not set up any agency or even an officer, who could keep a watch of the timing and quantum of cotton being exported. There has been none in the Government, who could collect and keep record of the export volume of cotton by outside buyers, which is necessary for ensuring that our textile mills, which account for some 3 million workers, get adequate supply of cotton for them to run 12 months a year.


It was heartening to note that one minister, after another, assured that the matter of regulating exports is under consideration of the Government, raising some hopes on the part of T&C industry for some respite, which was not to be. After several months of thoughtful consideration, the Government announced that the cotton exports would not be banned leaving the cotton and garment industry low and dry. The brunt of this decision had to be borne by the garment exporters, among others, who could not get good quality of fabrics at reasonable prices. In fact, the prices of some the fabrics went up as high as 30% during a short span of three months. AEPC as also other trade bodies have requested the Government to institute an enquiry as to how and why the prices of fabrics being used in export garments have suddenly gone that high and above all, the required quantity of certain fabrics are not available at all, even at higher prices. What great public interest was being sought to be achieved by creating situation when the prices of cotton and fabrics rose that high and when the required quantities of particular fabrics are not available at all. This would seriously jeopardize the export commitments of exports, who, by no stretch of imagine, could think that they would land in such a situation.


Why so: The only plausible explanation for total unacceptability of logical demand of the industry could be the pressure of cotton lobby-international or local.


Short conclusion: Government is not at all amendable to any logical demands of the industry.


Rupee Appreciation


The volatility of any currency can hurt the economy, particularly its export sector. Though depreciation of a currency can edge out competitors, but an appreciation of a currency can edge our products out. Of course, in the latter case, an exporter gets more rupees against every US dollar he earns. Indian Rupee has touched a low of Rs.37 to a US dollar and high of Rs.49 within a short span of a few months, which has turned the profits of the exporters in to the losses. While some of the more enterprising Indian exporters hedged their currency for the future, fearing appreciation of dollar sooner than later, but that was not to be and they incurred heavy losses and sought the Government help in offsetting their losses. No help or advice was available to the exporters at either points i.e. when the Rupee depreciated or when it appreciated.


I might point out that while determining the valuation of Indian Rupee is beyond the Government, as it depends, among others, the US dollar inflow or outflow, but the Government could certainly help by fixing the exchange rate of Indian Rupee to important currencies like US dollar or Euro, which could insulate the export trade from the violent fluctuations in the exchange rate. In this case, I would quote Chinas example, which has fixed the value of Yen in relationship to US Dollar with limited variations thereby immunizing their exporters. The Government of India should be a better judge as to how to immunize our exports from the volatility of Indian currency.


Short conclusion: No hopeful signs.


Duty Drawback


This has been another sour point with the T&C industry, which has been imploring the Government to fix the duty drawback on the basis of ground realities. It has argued with logic and facts that the duty drawback should be raised to at least 13% and that the present duty drawback rates hardly compensate the exporters for the cost, they incur on their export goods. They have even referred to the rapidity with which other countries have been responding to the requirements of their own garment exporters. The Big Brother, mighty China, which has usurped the global garment export trade by emerging as the largest garment exporter in the world, has revised its duty drawback rates as many as for 5 times and has presented pegged it at around 17% (which is additional to the subsidies that are available to Chinese exporters), which is far too higher than what is allowed in India.


 

In fact, Indian garment exporters have a greater reason to demand even higher duty drawback, if one were to compare the low electricity and banking charges payable in China. Why does the Government fail to see this? Is it myopic?


Short conclusion: The Government of India is myopic and any expectation of grant of reasonable demand would be hoping against hope. Credibility: Very low.


Simple Solution from Simpletons


When confronted with the situation of our constantly declining garment exports, our Textile and Commerce ministers exhort our exporters to look for new markets, as if they have been waiting for this valuable suggestion on this from the ministers. The exporters have been trying this route much earlier than it occurred in the minds of both the ministers. It is a matter of common sense that even in the new markets, there will be competition, since there are no earmarked countries, where Indian exports alone are allowed. Indian garment exporters should concentrate on Chinese market, too, was another piece of advice given to them. Yes, they could try, but it would be like carrying coal to New Castles.


Short conclusion: Government avoiding its responsibility to help and making infructuous suggestions.


What Is Expected In the Budget


One does not have to sooth sayer to anticipate as to what Budget could provide for Indian garment exporters?


In this context, I might draw the attention of our learned readers that Ministry of Finance, which makes the overall Budget provisions and the Planning Commission ensures judicious distribution of funds among ministries, departments and the State Governments, have already locked their horns. While the Planning Commission is demanding 18% hike over the last year Budget provision, the Finance Ministry is in no mood to provide more than 11%, which would be one of the lowest for the last several years. Compare the hike that Finance Ministry figure of 11% proposes for 2010-11 to the actual figures of 26.6% in 2004-05, 27.8% in 2005-06, 29.1% in 2006-07, 28.8% in 2007-08 and 31.4% in 2008-09 and 31.9% in 2009-10 (Budget estimates). While, a decline in percentage hike in next fiscal is certain, but even the degree of decline is a subject matter of hot debate between two wings of the Government. What would be the final figure would depend upon the duo-Finance Minister and Vice Chairman, Planning Commission.


Even the present situation is not conducive for any more funds coming in. Our hope, if any, of any fiscal support from the Government would be misplaced.


Even the Stimulus Packages I, II and III did not provide any soccer to Indian garment exporters and the latest package of Rs.500 crore faithfully refuses to provide any relief or help to Indian garment exporters. To hope for any relief in forthcoming Budget, would be nave and probably lack of enthusiasm among the trade and industry are the early signs of what is forthcoming or expected.


Here I refers to the author of article