Textile industry is a major contribution for the GDP if India. Being the next big employment generator after the agriculture industry, textilesector comprises 40% of the total export promotions. Witnessing a high growthtrajectory in the recent years, the industry has lured many big foreign firms,and is positively anticipated to acquire a FDI of 7 billion USD by 2015. Thecountry is now gearing up after its journey through the dark passage ofrecession to make things better.
Budget expectations for 2010 encompass a minimization in theinterest rates for exports, relief and allocation of fiscal incentives, andclarification of excise and customs taxes. The industry has also presented allits major demands and expectations to the concerned ministry. Textile makersexpect a removal of duties on MMF (Man Made Fibers) to increase the utilizationin the country as well as a 4% increase in the excise duty of MMF. They alsoseek that the export credit for textile and clothing units be provided at auniform rate of 5% interest which is currently at 8%.
Despite this fact, industry critics believe that theupcoming budget is not going to help the textile industry much. Thisspeculation is mainly due to the fact that the Government seems to focus moreon the social sector. Demands of the industry players are not addressed in thebudget which might prove disappointing for them. Regarding the 2010-2011budget, there is also a question whether the Government will withdraw theincentives that have been in effect since last year.
The textile sector does not seem to gain much except for agrant to a textile cluster in Tamil Nadu, leaving the other demands untouched. A2 billion grant for a textile cluster in Tirupur in Tamil Nadu will launch askill development programme aiding to boost employment in the textile andgarment sector. An extended 2% interest subvention scheme for exports coveringhandicrafts, carpets, handlooms and SMEs will all be available until March2011. Demand for MMF has not been met, which will infect the competitiveness ofthat segment. Minimum Alternate Tex (MAT) has been increased from the currentrate of 15% TO 18% of book profits. Increase in the MAT upto 18% will result ina negative consequence as very few companies will enjoy making profits.
However, there is yet another side of the coin to beconsidered as well. Some optimists believe that the forthcoming budget is notall going to have a negative implication on the textile sector. They positivelyassert that the industry will make some progress in the field of technology. TheTechnology Upgradation Fund (TUF) will play a major role in this. The textilesector has sought Rs 28.9 billion for 2009-2010. The Government has allotted Rs22.67 billion for 2010-2011.Under this scheme, textile units can avail loans atconcessional rates.
Battered by the global turmoil, Indian textile industry hasstarted recovering in the recent past, and has set high bench marks in theglobal market, especially in the Asian subcontinent comprising of Bangladesh, Vietnam, Sri Lanka, and Cambodia. The country is gradually invading the Chinese marketas well.
Overall, the garment industry enjoys some cheers while theMMF sector did not receive any boost. As a convincing argument, the budget canbe taken on a connotation that the Indian textile industry has successfullyrecovered from the economic downturn.
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