Ease of Doing Business in Textile Sector
- Varsha G Subramanian, TVC – Editorial Team
India has recently jumped 30 positions upwards, to become the top 100th country in terms of ease of doing business. This was announced by the World Bank Group’s latest Doing Business 2018: Reforming to Create Jobs report. This article discusses the various measures that facilitate ease of doing business in the textile sector.
Overview of the Indian Textile Industry
The Indian Textile Industry plays a pivotal role in the Indian economy, owing to its contribution to the nation’s industrial production, GDP, exports and high employment generation. The textile sector contributes 14% to industrial production and 4% to India’s GDP. The export earnings of this sector amounts to 13% of overall Indian exports.
The textile sector has the second largest employment generation after the agriculture sector. It also encompasses diverse skill sets that are required in the wide range of segments, ranging from products of traditional handloom, handicrafts, wool, silk products to the organized textile industry comprising of spinning, weaving, processing, apparel and garment.
Foreign Direct Investment in the Textile Sector
The Foreign Direct Investment [FDI] inflows in the textile sector, inclusive of dyed and printed textile, stood at US$2.47 billion from April 2000 to March 2017.
As per the consolidated FDI Policy by Department of Industrial Policy and Promotion, Ministry of Commerce and Industry, Government of India, 100% FDI is allowed in the textile sector under the automatic route. , an international investor can invest without prior approval either of the government or the Reserve Bank of India. The Ministry of Textiles has also set up an FDI Cell to attract FDI in the textile sector in the country.
Schemes pertaining to the Textile Sector
The Ministry of Textiles had implemented ‘Amended Technology Upgradation Fund Scheme [ATUFS] with effect from 13.01.2016, for a period of seven years. The ATUFS scheme provides one time capital subsidy for investments in the employment and technology intensive segments of the textile value chain keeping in view promotion of exports and imports substitution.
Under the Scheme for in situ up-gradation of plain power looms, the Government provides financial assistance to economically weaker plain powerloom units for upgradation of their existing ordinary looms with additional features. This scheme provides a level playing ground to the economically weaker plain powerloom units to compete with other players in the domestic as well as international markets.
The Scheme for Integrated Textile Parks [SITP] was launched in 2005 to provide the industry with state of the art world-class infrastructure facilities for setting up their textile units. The scheme also facilitates textile units to meet international environmental and social standards.
With over 45 million people, the textile industry is one of the largest source of employment generation in the country. In order to encourage employment generation, the Pradhan Mantri Rojgar Protsahan Yojana (PMRPY) Plan Scheme was designed, where the Government of India pays 8.33% EPS contribution of the employer for the generation of new employment. This scheme has a dual benefit, where, on the one hand, the employer is incentivized for increasing the employment base of workers in the establishment, and on the other hand, a large number of workers will find jobs in such establishments. A direct benefit is that these workers will have access to social security benefits of the organized sector.
In addition to the above, the Government has introduced Integrated Scheme for Skill Development. The purpose of this scheme is to address the trained manpower needs of textiles and related segments including Handicrafts, Handlooms, Sericulture, Jute, Technical Textiles etc. The scheme provides a cohesive and integrated framework of training based on the industry needs.
In order to help budding entrepreneurs develop innovative technical textile products, the Government has set up six Focus Incubation Centres under the Technology Mission on Technical Textiles.
The total budget allocation for the textile sector is Rs. 6226.5 crores for the year 2017-18. There are a slew of incentives provided in the current budget, which has been welcomed by the textile sector, discussed below:
- ATUFS received an allocation of Rs. 2013 crores for 2017-18.
- Scheme for in situ up-gradation of plain power looms received a budget of Rs. 68.31 crores which is a big budgetary boost form Rs. 48 crores last year.
- Fund allocation under Pradhan Mantri Paridhan Rojgar Protsahan Yojna is Rs 200 crores.
- Integrated Scheme for Skill Development for the textile sector received Rs. 174 crores.
- Reduction of corporate tax by 5% to MSME (turnover below Rs 50 crores), which would benefit textile and apparel industry as majority of the enterprises fall into this category.
- Basic custom duty on Nylon mono filament yarn (for use in long line system for Tuna fishing only) has been reduced to 5 per cent (from earlier 7.5 per cent).
The Government is targeting to achieve US$ 300 billion worth of textile exports by 2024-25 and create additional 35 million jobs in the textile sector. The fiscal incentives, along with the measures focusing on skill development and innovation, pave a promising road for the Indian textile industry in the future.
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