India’s textile industry was successfully clawing itself back from the Covid-19 debacle but unfortunately hit multiple roadblocks in 2022. The uncertain global economic conditions due to the Russia-Ukraine war increased costs of raw materials and sub-par capacity utilization majorly impacted the sector’s growth in the past 12 months. Cotton prices in India also shot up to unprecedented levels, which further worsened the profitability and margins of spinners.
Having said that, the industry is pinning its hopes on the forthcoming Union Budget and are hoping that our Finance Minister –Nirmala Sitharaman would take note of the industry’s needs. Here are some key expectations that the sector has from this Union Budget:
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1. Sign FTA with multiple countries
FREE TRADE AGREEMENTS (FTAS) is one of the best ways to boost the growth of the textile sector of India. The industry expects that India should actively pursue free-trade agreements (FTAs) with major export destinations like the EU and the US to push apparel shipments amid increasing competition from Bangladesh and Cambodia that enjoy tariff concessions.
2. Fast-tracking of PM MITRA
The PM-MITRA (Mega Integrated Textile Region and Apparel) parks scheme, under which seven integrated textile parks are to be set up in the country, will help develop the integrated textile value chain. These mega parks, textile makers say, could help return textile orders because of the planned integrated textile value chain—including spinning, weaving, and processing —at a single location. The industry is urging the government to fast-track the completion of these parks which would significantly help boost the sector.
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3. Improving the quality of raw materials
The largely water-intensive nature of the cotton crop, extensive use of fertilizers and pesticides and genetic modification have posed a significant environmental challenge as far as cotton cultivation is concerned. The industry is of the view that making farmers aware of healthier cotton practices and improving farming techniques can be the key to turning around the prevailing scenario. Better farming practices would lead to a better yield of cotton produce which would further help improve global demand for Indian textiles.
4. Stabilization of cotton prices
Cotton prices have been on the rise for the past 12 months and the government needs to take concrete steps to stabilize them. The government may allocate adequate funds for achieving international status for Indian cotton. The government may also consider a Cotton Price Stabilization Fund Scheme, which may consist of a 5 per cent interest subvention, reduction of margin money from 25 per cent to 5 per cent and increase of credit limit from three months to nine months. It would boost exports and enable 2-3 per cent additional growth in the industry.
I believe that this is an opportune time to open up the industry more, provide some sops, and rationalize some of the taxes to help the industry grow and grab a higher market share in the global textile market. And keeping this objective in mind as well as the fact that the textile sector is one of the significant employment generators, especially in the unorganized sector, as well as export earner (2nd largest exporter), the industry is looking for a rollback of the higher GST back to 5% level from the proposed GST rate of 12% effective 1st January 2023.
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Dr SN Modani
MD, Sangam India limited
Chairman, RTMA
