Textiles & garments sector need more fiscal incentives, ASSOCHAM

10 Mar '09

4 min read

In a bid to revive textiles and garment industry, The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the government to maximize fiscal policy support as also ensure interest subvention scheme so that it gradually comes out of its current recessionary plight.

The weakening rupee against dollar normally should have given some relief to textile exporters but due to persistent long power cuts and sluggish market conditions, textiles and garments continued to be extremely stressed sectors, said the ASSOCHAM.

Therefore, the government needs to further extend and maximize its fiscal incentives to textiles and garments, especially to fresh investments since investors are still keen to diversify their operations in textiles and garments as these will find markets even if the slowdown continues for longer in economies of scale.

“From the sunrise sector, textile sector is at verge of again slipping back to stagnant phase. Thus, some more tax concessions should still be extended to textiles and garments so that India is able to retain its competitiveness, especially at time when these industries are required to keep pace with stiff competition, emerging from India's neighbour.

Mr. Jindal said, “while the Eleventh Five Year Plan, targets 22 per cent growth in Indian textile exports, the growth rate has decelerated from 16.6 per cent in 2005-06 to less than 12 per cent now. The orders for textiles and garments have substantially fallen especially from US, European Union and even ASEAN as their economies are under severe financial crisis”.

According to ASSOCHAM, India needs to change the direction of its exports from the US and Europe to regions in Middle East, Africa and entire Gulf nations. Only 12.5 per cent and nine per cent of textile exports are directed towards Africa and Middle East respectively and these can be substantially increased provided the quality of Indian textiles and garments are subjected to further improvement which could be possible with certain more incentives. Huge potential lies ahead for strategic expansion of the export market, but unstable economic conditions at the short term period in African regions calls for special fiscal and monetary incentives for the new venture for a specified time period.

The growth rate in production of cloth by the mill sector decelerated from four per cent in 2006-07(April-March) to one per cent in the same period of FY'08. The cloth production by the power loom sector also witness slowdown from seven per cent to five per cent for the same periods. Similarly, growth of cloth production by handloom sector also witness marginal slip from seven per cent in 2006-07 (April-March) to six per cent in 2007-08 (April-March). The cascading effect is that the textile mills are likely to cut production further by 20-25 per cent, while some units have been closed down with millions getting unemployed.

Mr. Jindal pointed out that the second largest employment generating sector next to agriculture that accounts for 21 per cent of the total employment generation in the economy is expected to generate 17.37 million new direct and indirect jobs during the 11th five year period. On the contrast, the sector is already trailing behind and the crisis in turn have added the pressure as almost 1.5 million people across the textile verticals have lost job since last year, few more millions are going to join the group.

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