Textile Sector

Why is Textile Sector important?
Textile is important because
  • India’s textiles sector is one of the oldest industries in Indian economy dating back several centuries
  • It employs large number of people (Second largest after agriculture)
  • It has huge share in India’s export (11% of India’s total exports; US$ 40 billion; 13% of world production of textiles)
  • It contributes approximately 5% to India’s Gross Domestic Product (GDP), and 14% to overall Index of Industrial Production (IIP).
  • It has strong backword and forward linkages
  • Textile industry in India is one of the few sectors, which is truly competitive world-wide
  • India has a strong manufacturing base for variety of textile products, particularly cotton textile items of raw materials, trained manpower in manufacturing
What is wrong with textile sector?
  • Government policy has restricted technical upgradation and capacity expansion. It was restricted to small scale industry category only.
  • While India’s competitors built up massive capacities to meet global demand, India was stuck with debilitating rules and regulations
  • Rigidities in the labour market
  • Import restrictions on competing man-made fibres
  • Export quotas on cotton and logistics costs
  • Textile industry is facing slowdown, which is affecting sector’s ability to keep large no. of workers employed and also in providing employment to fresh manpower
  • India’s exports dropped by 2.4 per cent from 2014-15
  • The high price of domestic cotton, coupled with heavy duties on import of cheaper Chinese varieties, also hampered production of cotton goods
  • Between 2009 and 2015, the domestic market grew 10% every year for the Indian textile and clothing sector, and exports rose almost 8% year-on-year. For the last three years, exports have almost stagnated. Countries such as Vietnam have overtaken India in yarn exports to China.
  • When the global economic slowdown hit the industry seven years ago, the Centre had come out with a time-bound stimulus package. The two major policy decisions of the government in the recent past, demonetisation and GST, have impacted the industry more than the economic slowdown.
What government has done?
  • Government has specific schemes for the sector like TUFS and Amended TUFS
  • Government has  announced a Rs.6,000-crore special package for the textile and apparel sector with an aim to:
    • Create 10 million new jobs in the next three years
    • Attract investments of $11 billion
    • Generate an additional $30 billion in exports
  • Additional incentives for duty drawback scheme for garments
  • Flexibility in labour laws to increase productivity
  • Government has allowed 100% FDI in the Indian textiles sector under the automatic route.
What are the key provisions in the package announced?
  • Several tax breaks and production incentives
  • It aims to help in creating one crore jobs, mostly for women, in the next three years
  • The package breaks new ground in moving from input-based to outcome-based incentives; a unique feature of the scheme will be to disburse subsidy only after expected jobs have been created
  • To ensure increased earnings for workers, the package specifies that overtime hours for workers shall not to exceed eight hours per week — in line with International Labour Organisation norms
Role of demographic dividend?
  • China, like most countries before it such as Japan or Korea, has reached a stage where factor costs have increased and this is forcing it to opt for more technology-intensive methods.
  • India, with labour costs still low, has a decade in hand, at best. India must quickly improve its infrastructure — ports, roads, electricity — to ensure that these new measures come to fruition

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