Union Budget 2023: What is there for the Textile Industry?

The Union Budget 2023 has several provisions to promote the growth of the textile industry in India. The budget allocates a total grant of Rs. 4,389.34 crore for textiles, which is 22.6% higher than the revised budget grant for 2022-23. The launch of new schemes and the allocation of funds is expected to create a positive impact on the industry, increase production, and boost exports.

One of the key provisions of the budget is the retention of the 5% import duty on all types of textile machinery until March 31, 2023, followed by an increase to 7.5% thereafter. The budget also seeks to increase the basic customs duty on imports of  the MMF Yarn to 10% from 5% and restore the duty-free imports facility against made ups exports. Additionally, the budget covers cotton yarn exports under the 3% interest equalization scheme.

The textile industry in India holds a 4% share of the global trade in textiles and apparel and is one of the largest producers of cotton and jute in the world. The industry contributes significantly to India’s export earnings, with its share in India’s total exports at 11.4% in 2020-21. India is also the second-largest producer of silk in the world, and 95% of the world’s total hand-woven fabric comes from India.

While the budget has several provisions to promote the growth of the textile industry, some experts have also expressed certain expectations from the budget. For instance, the industry has been seeking government support for technology integration and the quick production of smart textiles. The textile industry in Tamil Nadu has sought export incentives and additional credit support from the budget.

Union Budget 2023 has allocated a significant amount of funds to the MSME sector in general, which is expected to have a positive impact on the Textile Industry as well. The Finance Ministry plans to infuse Rs.9,000 crore into the Credit Guarantee Fund Trust for Micro and Small Enterprises Credit Guarantee Scheme, which will facilitate extra financing of Rs 2 lakh crore. This high allocation is expected to boost employment in the country as the MSME sector is among the biggest employers in India. Additionally, the revamped credit guarantee scheme has been hailed by the MSME sector as a positive move.

It is worth noting that the MSME sector accounts for about 30% of the country’s total GDP and holds a strong position in the country’s vision of Amrit Kaal (25 years up to 2047). The Union Budget 2023 has also announced several other initiatives to support the MSME sector, including simplifying compliances and redesigning the CGTMSE for MSME. Moreover, MSME suppliers unable to execute contracts during the Covid pandemic will get 95% of their forfeited amount back by the government.

Talking about the Direct and Indirect benefits to Textile Industry, Mr. Gurudas V. Aras has put some compelling points, 

Direct Benefits:

1. Special focus on enhancing productivity of extra-long staple (ELS) cotton: The budget has announced a special focus on enhancing the productivity of extra-long staple (ELS) cotton, which is a high-value cotton variety. This will help in increasing the income of cotton farmers and boosting the availability of high-quality cotton for the textile industry.
2. Five new HS Codes for further classification of cotton: The budget has introduced five new HS Codes for further classification of cotton based on staple length. This will help in better classification of cotton and promote the use of high-quality cotton in the textile industry.
3. Increase in outlay for RoDTEP and ATUFS schemes: The budget has increased the outlay for the RoDTEP and ATUFS schemes, which are aimed at promoting exports and upgrading technology in the textile industry. This will provide direct benefits to the textile industry by enabling it to upgrade its technology and compete in the global market.
4. Increase in import duty for textile machinery: The budget has increased the import duty for textile machinery to 7.5% to encourage domestic manufacturing. While this might impact the industry adversely in the short term, it will provide a long-term benefit by promoting domestic manufacturing and reducing dependence on imports.

Indirect Benefits:

1. Revised income tax limits: The budget has revised the income tax limits, which will increase the disposable income in the hands of consumers. This is expected to increase the demand for textiles and boost the growth of the industry.
2. Increased outlay for infrastructure: The budget has increased the outlay for infrastructure, including the creation of 100 new transport infrastructure projects, 50 new airports, and the creation of urban infrastructure in Tier 2 and 3 cities. This is expected to increase the consumption of technical textiles, such as geotextiles and composites.
3. Setting up of Agriculture Accelerator Fund: The budget has announced the setting up of an Agriculture Accelerator Fund, which will help in funding research on increasing the yield per hectare of cotton. This will indirectly benefit the textile industry by improving the availability of high-quality cotton.
4. Revamped credit Guarantee Scheme for MSMEs: The budget has announced a revamped Credit Guarantee Scheme for MSMEs, which will enable additional collateral-free guaranteed credit of Rs. 2 lakh crore and reduce costs by 1%. Since the majority of the textile sector is under MSME, this will make it easier for textile companies to access credit and boost their growth.
5. Increased outlay on defence spending: The budget has increased the outlay on defence spending by 13%, which will give an opportunity to spend more on protective clothing for our armed forces. This will indirectly benefit the textile industry, as it will create demand for protective clothing and promote innovation in the sector.