The textile industry was the first organised segment that facilitated the Industrial Revolution. It is time to bring in some reforms in its Indian counterpart, say Krrishan Singhania, Karan Dogra and Yuga Deodhar.

Textile Industry can be recognised as the first organised industry facilitating the industrial revolution in the 18th Century. Global industrialisation has witnessed the lead of apparel sector in generating employment and spreading out manufacturing and exports of countries. 'English East India Company' focused on the trade of Indian cotton and silk, that turned into one of the richest and powerful corporations of its time. Today, being the second largest manufacturing capacity on a global front, India accounts for 13 per cent of the world's production of textile, fibre and yarn.

In 2013, India ranked 2nd in terms of export in textile and garment across the world, surpassing Italy and Germany. As India is a sourcing hub of the textile industry with the abundant availability of raw materials and skilled workforce; this industry is honored as the second largest employer of the nation after the agriculture industry. Considering our glorious history and current headway, a package of Rs 6,000 Cr has recently been announced welcoming the splendid future of the Indian textile industry.

Seizing opportunities and pitching the right times:

'Multi Fibre Agreement' ("agreement") was an international trade agreement imposing ration or quotas on the quantity that developing countries may possibly export in the form of fabric, yarn, clothing to the countries, which were already developed (1974 - 2004). When this agreement was phased out, it was expected that India would derive some benefit out of it. But the textile industry didn't grow up in the manner it should have been, though India gets textile industry through its inheritance. Despite its import decision for competing with man-made fibres, obstinacy in the labour market, the export quotas in reference to cotton and logistics costs have prevented the country from making the most out of these benefits.

Now, due to its rising domestic wages, China has begun to exit from textile and apparel sector. This exit leaves a huge demand base for India to exploit. India is well positioned to seize the opportunity of China's deteriorating competitiveness because the wage costs in most of the Indian states are notably lower than China. But, the hurdle in this path is of the other competitors; since the space vacated by China is being occupied by Bangladesh and Vietnam and they are overtaking Indian apparel exports. Thus, the window of this opportunity is narrowing and India needs to act rapidly to regain competitiveness and apparel market share.

Fortunately, Indian government has foreseen this second opportunity to capture the market share and competitiveness in global textile marketplace and have announced this package.

Contribution of the sector in social transformations:

Textile sector is labour intensive and has the greatest potential for employment growth. To facilitate export generation and social transformation with the milieu of tremendous manpower that India flaunts, a formal and productive employment generation is necessary in India. Therefore, union cabinet's approval to boost the apparel sector is a significant initiative policy.

Another social transformation perspective is that, this sector generates large number of jobs for women, appreciably more than any other sector. Thus, India's declining female labour participation could equally be boosted with this initiative, strengthening the empowerment of Indian women to a greater extent that has always been one of the prime motto and agenda of Rahul Gandhi. This policy should keep both the parties abreast.

Current challenges in front of Indian Textile Industry (ITI):

Competitors of India are enjoying better market access because of zero or lower tariffs to the exports made by them specially to the US and Europe. However, Indian exports face an average tariff of 9.2 per cent. This gives us a clarity of the disadvantageous position India is facing, in the global markets. In addition to this external disadvantage, Indian exporting firms are facing a many domestic challenges such as follows:

* The time and cost involved in transporting goods from industrial unit to destination is greater than those for other countries. Such cost and time obstacles faced in domestic and international markets reduces the flexibility of manufacturers. However, improvement of logistics and infrastructure is expected with the upcoming introduction of goods & service tax; as it aims at removal of interstate trade barriers as well as logistic inefficiencies. Besides this, India is also building two transhipment ports in its southern tip which will facilitate in reducing containers' traffic, costs and distance from international shipping routes. Removing such logistic inefficiencies can smoothen the process of boosting international trade.

* Labour costs, perhaps is one of India's only comparative advantage in this sector that also does not seem to work in its favour. This difficulty is because of its regulations in terms of the minimum overtime pay, lack of flexibility in part-time work, difficult contributions that become de facto taxes for low-paid workers and high minimum wages in some cases.

* Also, industry suffers productivity issues due to small scale, unorganized and aged nature of our textile business. Around 60 per cent of the spindles used in India are more than 25 years old.

* Another challenge is increasingly shifting world's demand towards clothing based on man-made fibres. Indian domestic taxation favours cotton-based production and tariff policy guards an inefficient man-made fibre sector weakening us in the competitive global market.

Policy:

Efforts have been made to address some of the above challenges, leading towards a long way in strengthening India's apparel industry. Salient features of the package announced are:

* Apparel exporters will be provided a relief to compensate the impact of state taxes embedded in exports, which could be as high as 5 per cent of the exports. This is not a subsidy but a drawback scheme. Rs 5,500 Cr out of the Rs 6,000 Cr package is allocated with an additional 5 per duty drawback for refunding state levies.

* The government is making plans to work on incentivizing the textile and apparel firms in order to engross more labour by offering a pay in share of the Employees' Provident Fund for new employees. Decision has been made not to exceed workers' overtime hours above 8 per week leading to increased earnings for the workers.

* As the nature of the industry is seasonal, fixed term employment is to be introduced for the garment sector, since the fashion changes but not the tendency or requirement of that particular garment or textile.

* The provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for garment industry.

Also, the government is sincerely taking into consideration the impact of Indian exporters being deprived in foreign markets. India needs to cautiously weigh the costs and benefits of negotiating new free trade agreements.

It is observed that the industrial policy initiatives aiming at promoting particular sector are not without risks. But taking into consideration the India's employment, exports, social transformation, potential competitive advantage and the narrow window of opportunity; this risk is worth taking. It is expected that this step will boost exports, increase investment and make the textile industry a vital part of the 'Make in India' programme.

Further scope for development:

Though the decision of this package is bold, important and very timely, it has become very much competitive for the textile and apparel industry at an international level and it indeed needs some more major refurbishments such as follows:

* Much weight age should be given to the promotion and marketing of textiles and its designs, which are indigenous to India and in turn leads to increment in India's current per capita spent on garment.

* Geographical indications further can prove to be an actual means for safeguarding a niche Indian handloom market at an international level.

* Given increasing rate of Internet penetration in the country, e-commerce can also be used as an advantage of the textile industry to eradicate middlemen layers and improve its access.

Promoting traditional indigenous industry doesn't mean building a shield against the developing competition from synthetic fibre through charges. If the industry has to progress successfully, it must be allowed to grow using its full potential. And for that, it is important to expand and adopt new innovations.