The June 22 textile package announced by the Union government is being described in many quarters as the proverbial stitch in time. But whether it will, like the proverb foretells, be able to save nine, is a question that needs circumspection.

That said, there is little doubt that the ₹6,000 crore package has come as a much-needed whiff of fresh air for a desperate industry that has been gasping for breath. The last two Budgets had little on offer for the textiles and apparel industry, and the National Textiles Policy (NTP) is yet to see the light of day. Of course, a package is no answer for a policy, especially when the package in question is not moored in a straight-jacket, all-encompassing policy; but as they say, desperate times call for desperate measures. In that, the package is definitely a boost for industry. And that's why it has been welcomed by industry.

It's also quite clear that the package does not wish to supplant that NTP, which has been hanging fire for reasons unknown. The package is short-term: it looks at yielding results only over the next three years. And as a ministry official subsequently told a newspaper, the Centre wants to implement its package over the next three months, and thus promote employment generation, economies of scale and boost exports.

The package, on the face of it looks quite brief, but its effects are going to be far and wide. The promises, made in terms of numbers, are quite ambitious: jobs for 1 crore people, mostly women; $30 billion in exports; and investment worth ₹74,000 crore. All that in a matter of three years. An official statement described it thus, "The package is a strategic decision that would strengthen and empower the Indian textile and apparel sector by improving its cost competitiveness in the global market. The measures assume significance due also to its potential for social transformation through women empowerment; since 70 per cent of the workforce in the garment industry are women, majority of the new jobs created are likely to go to women."

Of the six heads under which a slew of measures were announced, the enhanced duty drawback of 5 per cent will be costing the government the most. This scheme is being introduced to refund the state levies which were not refunded earlier. The ministry said, "This move will greatly boost the competitiveness of Indian exports in foreign markets and is expected to cost ₹5500 crore to the exchequer." The employment generation as a result of this scheme is projected to be 9.5 lakh, while the exports accrued would be around $9.5 billion. Around ₹500 crore would go into additional funding under the Technology Upgradation Fund Scheme (TUFS) with the subsidy being increased from 15 per cent to 25 per cent. This is likely to create employment opportunities for 12.25 lakh people, and yield exports worth $7.0 billion.

The biggest chunk of jobs is supposed to come through indirect employment as a result of the package: a staggering 56.4 lakh. This is a possible grey area since no monitoring or tracking measures have been announced. All the more so, since about 80 per cent of the labour-intensive apparel sector is dominated by small-scale industries. Direct employment, on the other hand, is projected to be roughly 10.7 lakh in the upstream segments of yarn, fabric and processing.

With much of the announcement talking about job creation, it is no surprise that the government would bear some costs on this front too. The entire employer's contribution of 12 per cent under the Employees' Provident Fund (EPF) Scheme, for new employees of garment industry earning less than ₹15,000 per month will be borne by the government. Already, the government funds 8.33 per cent towards employer's contribution under the Pradhan Mantri Rozgar Protsahan Yojana (PMRPY). The ministry of textiles will now foot the balance 3.67 per cent share. The amount under this head is expected to be ₹1,170 crore over the next three years. Moreover, EPF will be optional for employees earning less than ₹15,000 per month. All this, the government believes, will leave more money in the hands of workers and also promote employment in the organised sector.

While other measures can be a matter of debate, one decision that may be seen as worker-friendly is the introduction of fixed-term employment. According to the package, "A fixed term workman will be considered at par with permanent workman in terms of working hours, wages, allowances and other statutory dues." This, of course, works if contracts don't eat into permanent jobs.

The immediate reasons for the June 22 package can be found in the PowerPoint presentation that was released by the ministry of textiles on the occasion. It looked at the sector's potential, especially in terms of the "incomparable employment potential of garmenting sector". It pointed out that every 1 crore rupees of investment generated a minimum of 70 jobs in the garmenting sector as compared to 10 in steel and 25 in the automobile sector. The other opportunity that the ministry saw was in China ceding space in the global textiles and apparel industry due to its focus on high technology sectors and rising wage costs in that country. The same presentation had acknowledged that apparel exports of Bangladesh and Vietnam had surpassed those of India, which was the clear leader (among the three countries) from 1995 to 2000. With policy support, India can regain its position in the next three years. That, in short, appears to be the objective of the package.

In fact, this thrust is in sync with an April 2016 report of the World Bank titled Stitches to Riches? Apparel Employment, Trade, and Economic Development in South Asia which had remarked, "South Asia could potentially pick the low-hanging fruit in the apparel sector and expand apparel exports as China's labour costs continue to rise and the growth rate of the Chinese market share in the global apparel sector continues to slow down. Even though South Asia is not as well positioned as its East Asian competitors, this study argues that under a business-as-usual scenario-that is, no dramatic changes in policy-South Asia could substitute for some of the Chinese exports. Specifically, a 10 per cent price increase in China would increase US imports from South Asia by 13-25 per cent, compared to 37-51 percent for those from Southeast Asia."

The package's repeated emphasis on employment of women is also in tune with the World Bank report which had pointed out, "At the microeconomic level, some studies show that female labour force participation (LFP) and employment is beneficial for a number of household indicators, including children's health and education and decision making about fertility and marriage." The argument was about increased employment of women in the textiles sector having a far-reaching effect on society. The report said, "A recent study (conducted as recently as in 2014) on women employed in the textile industry finds that those with a longer history of employment tended to delay marriage and have a lower desired fertility rate. Moreover, these effects had spillovers within the family-the younger sisters of women who worked in textiles also married later, and their younger brothers were less likely to drop out of school." The textiles and apparel industry is the most female-intensive employing sector in all of South Asia, with women making up 71 per cent of the workforce in Sri Lanka, 34 per cent in Bangladesh, and 35 per cent in India.

So, if the package works, it can lead to overall development.

But a package that hinges mostly on exports can have too many extraneous factors pulling the strings, that too in many directions. One of the many reasons why Vietnam and Bangladesh have been able to race ahead of India is the trade benefits that they enjoy with major blocs. Indian exporters pay close to 10 per cent duties for supplies to the European Union (EU), while Bangladesh, Pakistan and Cambodia have zero duty access to the bloc. The EU is important: it accounts for about 37 per cent of India's apparel exports, with the United Kingdom (UK) alone consuming a third of that. But with Brexit, a lot of that might change. The Trans-Pacific Partnership (TPP) is still not a reality, but it is still looming large on the horizon.

The other word of caution came from ratings agency ICRA, "As has been highlighted by ICRA, India's garment exports are highly skewed towards cotton-based sectors,as reflected in their share of ~70 per cent of India's total textile exports, whereas the global fibre consumption is largely skewed towards man-made fibre. This apart, the domestic textile sector suffers from a lot of structural inefficiencies, whereby the garment manufacturing clusters are located away from fabric manufacturing clusters, which in-turn are located at a distance from yarn manufacturing and cotton growing clusters. This leads to lot of systemic inefficiencies and competitive disadvantage for the India's textile exports. Unless these issues are addressed, the competitiveness of India's export will always remain under threat." This concern is nothing new, and cannot possibly be addressed by a financial package alone. The issue of NTP once again assumes significance.

The World Bank report too had observed, "India has mid-range unit values (as does China), despite buyers' perceptions of its having comparatively higher prices. Where they differ, however, is across all other criteria, with India ranking among the bottom in productivity, product diversity, and lead times." The Bank had a clear-cut suggestion: improve product diversity by reducing tariffs and import barriers to ease access to man-made fibres (such as more transparency for duty drawback schemes and bonded warehouses, and removing anti-dumping duties on man-made fibres). Also lower excise taxes or provide other incentives to develop a domestic man-made fibre industry.

All said and done, the textiles package is certainly a start. But for it to yield dividends, India will have to clinch free trade agreements, hopefully by the dozen. And, quickly too.