What does the budget 2012-13 on the table have for the Indian textile and apparel sector? What are the industry emotions regarding the same?

The proposed budget for 2012 is evoking mixed reactions. The budget states India as a front runner in economic growth in any cross-country comparison. It expresses belief in India's GDP growth to be 7.6% for 2012-13. While there are some direct tax proposals, there were other surprises in the form of amendments. With regards to the indirect taxes, amendments were planned with a two-fold objective of increasing revenue, as well as moving towards the GST (Goods & Service Tax) regime.

Indian textile and apparel sector is pivotal for enhancing the country's economy. Though some areas would get relief from the proposed budget, negative opinion also prevails regarding the same. The budget is expected to have a marginal benefit on the textile industries at the higher end of the value chain. However, there is no reference regarding the Technology Upgradation Fund Scheme (TUFS).

Excise Duty:

Earlier excise duty on apparels was 45% on the garment's value. Remaining 55% was regarded as non-manufacturing expenses, and was not taxed. Currently the garment would have an excise duty of 30% on its MRP, and the remaining 70% would be considered as non-manufacturing cost. For instance; if the apparel cost is Rs. 100; the earlier duty was 4.50, and now it would be3.60.

Mr. Mukund Chaudhary of Spentex Industries Ltd feels that the budget is neutral. He quotes, "I would say it is a neutral kind of budget, and it did not meet my expectations. There's not much for the textile industry. We had requested for the waiver of duty on branded apparels which has apparently not happened. It has only been reduced to 3.6% in totality."


More Focus on small scale units:

Sharing her opinion exclusively with Fibre2Fashion, Mrs.Chandrima Chatterjee, Director, Economic & Consultancy, AEPC feels that the budget focuses more on small scale units. She says, "At the macro level, the Union Budget has taken up some important issues like skill development and infrastructure development. However, with regard to the textile value chain, the measures are largely selective.

The apparel sector needs some measures for improving competitiveness, like incentivizing diversification of fiber base - from cotton to manmade fibers, use of technology for large scale manufacture of special fibers and specialty fabrics and garments, expansion for bringing scales. The financial incentives required for such initiatives are missing. Worldwide apparel industry is moving towards being more organized and large scale. But in India, the focus has remained on the small scale units and handlooms."

MMF:

The budget levies 5% customs duty, and 4% special additional duty on manmade fibre textiles. This is feared to ultimately increase the price of apparels made from manmade fibres. The Northern India Textile Mills Association (NITMA) President, Mr. K K Agarwal says, "The industry in its recommendations have asked for reduction of excise duty for MMF, the duty has been increased to 12% from 10%, and this step will make the domestic industry less competitive with the competing countries. Echoing similar sentiments, Mr Mukund Chaudhary states, "We had also requested for abolishment of excise duty on man-made fibre. But apparently it has gone up from 10% to 12%."

Technical Textile sector on the budget spotlight:

A FICCI Techno pack report states the value of Indian technical textile sector to be $8.25 billion (Source: Times of India). Registering a growth of 11.25% per annum, technical textile market in India is predicted by analysts to grow and reach $37 billion by 2020.

Poised for a robust growth, Indian technical textile sector is also getting more attention in the budget. Sectors like agri-tech, geo-tech, and medi-tech are covered as special sectors for growth. The customs duty on raw materials used in technical textile sector are reduced from 7.5% to 5%. The budget further allots ` 500 crore for a pilot scheme in the 12th Five Year Plan promoting the application of geo textiles. Import duty for aramid yarn and fabrics are waived off. `5000 crore venture fund has also been announced for enhancing small and medium scale technical textile units.

It is not possible that the budget would have everything for everybody. To create an ideal situation, inflation and account deficit needs to be low. Overall the budget has evoked a mixed reaction among textile players, some stating it is good as shuttleless looms have been exempted from duty, and tax on branded apparels are reduced. Few others state more focus is on small scale units. Increased duty on MMF has also evoked some dissatisfaction.

Budget for 2012-13 is chalked out suggesting economy is turning around with the core sectors and manufacturing units showing recovery signs. It further aims to achieve faster, sustainable, and a better inclusive growth through the 12th Five Year Plan.

Reference:


Indiabudget.nic.in