Textile industry hails India Budget for MSME & employment boost

Dr. S K Sundararaman, chairman, The Southern India Mills’ Association (SIMA), commented, “The Government has been giving major thrust for strengthening the MSME segments. The pathbreaking initiatives taken for the MSMEs are significant relaxation in the eligibility criteria for MSME by increasing the asset value of ₹50 crore (~$5.97 million) and annual sales turnover of ₹250 crore (~$29.87 million) and the said measures have enabled more than 80 per cent of the textile manufacturing units in the country to get qualified under MSME category.”

He stated that with employment, skilling, and MSMEs being the major themes of the Budget, the various announcements related to these areas would benefit the labour-intensive textile industry. He welcomed the announcement of the Credit Guarantee Scheme for MSMEs, which facilitates term loans for the purchase of machinery and equipment without collateral or third-party guarantee cover up to ₹100 crore (~$1.19 million). Additionally, he appreciated the mechanism for continuing bank credit to MSMEs during their stressed periods, allowing them to avoid entering the NPA stage.

The SIMA chairman also welcomed the reduction of the basic customs duty (BCD) on Methylene Diphenyl Diisocyanate (MDI), used in the manufacture of spandex yarn, from 7.5 per cent to 5 per cent. This measure addresses the duty inversion and enhances the global competitiveness of textile goods manufacturers using such yarn. He noted the exponential increase in the use of spandex yarn and hoped that domestic manufacturers would pass on the benefit to downstream sectors.

The chairman praised the allocations for exports, specifically RoDTEP and RoSCTL, with increases of 5.8 per cent and 10 per cent, respectively, for 2024-25 compared to 2023-24. This boost is much needed as textile exports are currently on a downward trend due to various external factors. He lauded the Employment Linked Incentive Scheme, which reimburses EPFO contributions of employers up to ₹3,000 per month for two years for new recruits. He also welcomed the announcement of a one-month wage for new entrants in all formal sectors, provided in three instalments up to ₹15,000.

Various announcements made for strengthening infrastructure facilities such as roads, ports, waterways, and airports will reduce logistics and transaction costs, thereby enhancing global competitiveness. The agricultural announcements will benefit cotton farmers by improving productivity and increasing the area under natural farming, which in turn benefits the predominantly cotton-based textile industry. The increase in the limit of MUDRA loans will benefit small traders, handloom, and power loom weavers in the textile industry.

The chairman noted that the announcement of 12 industrial parks with plug-and-play facilities, rental housing with dormitory-type accommodation in PPP mode, would also benefit the textile industry. He highlighted that the announcements related to energy security, innovation, research and development, and regular allocations for the textile industry towards TUF Scheme, skill development, PLI, NTTM, and PM-MITRA Park would enable the industry to progress significantly.

“This budget is extremely pragmatic and innovative in some of the bold decisions and directions it has taken to encourage employment directly. The steps include an internship scheme, the decision to reimburse one-month wages for new employees, and subsidies for employees earning over a lakh of rupees,” said Rahul Mehta, chief mentor, Clothing Manufacturers Association of India (CMAI). “These are excellent steps being taken. However, there are many open-ended areas at this point, and we await the details before making specific suggestions. Nonetheless, this is a visionary, pragmatic, and very innovative budget. Whilst most of these measures are for all industries, they will likely benefit the textile and apparel industry equally, if not more, since it is more labour-oriented. Therefore, we are confident it will benefit the apparel industry.”

Furthermore, additional measures announced to support bank credits to MSMEs and easing of foreign investment will also benefit textile and apparel industry. The import relaxation in some of the important raw materials, trims and accessories required for garment manufactures will also help the garment manufacturers to be more competitive, especially in the Export markets, added Mehta.

Kumar Rajagopalan, CEO, Retailers Association of India (RAI), commented, “The government has tried to strike a balance between populist and policy measures. The government's focus on empowering the middle class and rural population is appreciating steps. The initiatives such as monetary support for farmers, higher exemption limits in personal income tax, and increased standard deductions will provide higher disposable income, leading to increased spending. It will stimulate consumption growth, thereby boosting the overall economy. The reduction of duty on gold, precious metals, and mobile phones will also provide a significant boost to these sectors, particularly during the festive season.”

He stated that the government's commitment to skilling and employment support, including initiatives for youth employment and skilling programmes, is another commendable aspect of the budget, ensuring a future-ready workforce in the retail sector. The budget's emphasis on MSMEs and startups, including enabling more lending and abolishing the angel tax, is a positive step towards realising their potential. The measures for tax simplification and compliance, which are crucial needs of the hour, have also been addressed. Additionally, the Employment Linked Incentive scheme is a welcome move.

The establishment of working women's hostels and crèches in collaboration with the industry is an essential measure for supporting women working in the retail sector. The focus on developing infrastructure for shopping as part of urban development is a significant step forward.

Rachna Sarup, founder & CEO, B77 Techstyles Pvt Ltd said, “The Budget brings a mix of opportunities and challenges for the textile industry. Increased funding for infrastructure and support for MSMEs could drive sector growth. However, rising raw material costs and tighter environmental regulations pose significant challenges, particularly for smaller players.”

She noted that the budget's emphasis on sustainability aligns with global trends, encouraging eco-friendly practices. While this is beneficial for long-term industry health, it may increase compliance costs for smaller firms. Sarup believes that the budget offers potential for growth if the sector can navigate these new financial and regulatory pressures effectively.

The Indian government has significantly increased the budget allocation for the Ministry of Textiles for the financial year 2024-25, highlighting its commitment to enhancing the sector’s growth and global competitiveness. The total budget allocation for the Ministry has been raised from ₹3,443.09 crore in the revised 2023-24 budget to ₹4,417.03 crore in the 2024-25 budget. Sarup concluded, "We are sure to see the impact in the industry."

Fibre2Fashion News Desk (KUL)