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Underdeveloped infrastructure affects FDI in textiles
07
Oct '16
Underdeveloped infrastructure, restrictive environment and a lack of trade agreement with key markets have been identified as the main reasons for the unsatisfactory foreign direct investment (FDI) inflow in the Indian textile sector, says a recent study. Stringent labour laws were also cited as one of the major challenges that hamper the FDI inflow.

In order to attract large scale investments, acquire global scale and bring India at par with other competing countries, there is an immediate need to review the labour laws to make them investor and labour friendly, says the study that was commissioned by the Indian ministry of textiles.

Labour laws restricting women from working in night shifts and the Industrial Dispute Act, 1947 that stipulates that companies employing over 100 people must obtain necessary approvals for lay-offs need to be amended to rectify the situation.

“Despite India offering a large domestic market, competitive labour costs and a well working democracy, its performance in attracting FDI flows has been far from satisfactory. The country's weakness lies in underdeveloped infrastructure and restrictive operative environment and lack of trade agreement with key markets,” notes the study.

Apparel and textile exporting nations like Bangladesh, Vietnam, Turkey, Cambodia and Pakistan have duty advantage ranging from 10 per cent to 30 per cent for different products in the US and EU markets. This advantage enables them to achieve exports growth rates higher than that of India, according to media reports.

The report points out that the cumulative FDI in Indian textile sector from 2000-01 to 2014-15 is approximately $1.5 billion.

By region, Africa is the largest investor in Indian textile sector, with nearly one-third of the total FDI inflows in India since 2000-01. Out of the investment of $462 million from Africa, Mauritius accounts for about 99 per cent of investment.

Europe ranked second in FDI inflows in India accounting for 25 per cent of total investments. The top 3 investing countries of Europe are Belgium (27 per cent), Finland (13 per cent) and Switzerland (11 per cent). Asia and America are the third and fourth largest investors in the Indian textile industry by region, respectively.

The FDI policy in India allows 100 per cent FDI in the textile sector under the automatic route. (KD)

 

Fibre2Fashion News Desk – India

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