As 26 February 2010 is nearing, everybody is concerned about what the Budget will bring in. Trade, industry are particularly concerned with this Budget in view of the fact that this will be the first Budget which is being presented after the clouds of recession have withered away in India and are receding in other parts of the world, particularly those countries, which are our export destinations. We, at The Stitch Times, have regularly been putting forth to the Government as to what is required by the industry, which is legitimate. That was done as even we had had some reservations on the demands being raised by the trade and industry bodies, which tend to overlook the constraints that the Government has to content with.


In the run up of the Union Budget, Union Finance Minister has been holding discussions with almost everybody concerned, more particularly the trade bodies, so that their point of view could also be taken in to account. The trade bodies, on their part, have been making lengthy but generally valid presentations on the issues, confronting their members.


Changing Perspective


The result has been that the Union Budget has often been criticized, in an unoffending manner and give locate some points, on which they can praise the Budget. However, the fact remains that in some cases, particularly I am referring to the textile and apparel export sector, the Government has been less than considerate all the time, particularly ever since UPA Government has come to power; whether in its earlier incarnation or its later version of UPA-ii.


To my mind, both the high expectations of the trade and industry before the Budget presentation and equally serious disappointment after the Budget is announced are somewhat misplaced. It has often been stated that earlier dispensation had taken better care of textile and garment industry than say for the last few years. I agree with most of the demands of garment trade and industry, in principle, but then, this has to be judged with reference to the priorities of the Government, which keeps on shifting. Earlier, the contribution being made by the textile and garment industry, both in terms of earning scarce foreign exchange and creating employment, was given due and deserving importance.


But the times have now changed. The country does not desperately need foreign exchange we needed earlier to enable us to pay for imports and meet other foreign exchange requirements; in fact, it is sitting on a higher pile of foreign exchange than ever before. Today, our Service sector is a major foreign exchange earner. Similarly, even the emphasis on augmenting employment does not reflect the soar need; in as much as both the Service sector and other rural employment programmes like NREGA has been able to provide alternate employment sources.


Probably, if one were to rise above the loyal, but single-industry (in the present case, textile and garment industry) point of view and switch over to macro view, one would tend to agree to the changed perspective, where the past glories could be basked, but could not claim the attention, disproportionate to its present status in the revised scenario.


Changed World Scenario


Tsunamis, particularly financial Tsunamis do not come with prior announcement, though the professionals do sense well before the time, Tsunamis actually come. Though the financial Tsunami was in the making for quite sometime, and some of knowledgeable sources did smell what was likely or even coming, as the American financial system was not working on sound financial basis. That financial Tsunami did cause serious devastation across the countries. Fortunately, that financial crisis seems to be over, as US President Obama said, but the devastation remains, which needs to be undone. Our major export destinations are showing signs of recovery which gives hope to our beleaguered industries.


Crucial Time for Textile and Garment Exports


This is a crucial time for the textile and garment exporters for a number of reasons. First, the serious downward trend of the economies all over the world has stopped and in many cases, recovery, howsoever, mild has been witnessed. There is some new found enthusiasm in the US and the EU, which are our export destinations of great significance. Though their economies are looking up, even if they are not completely out of woods. It is heartening to see the ray of hope and the general optimism that mark the world markets today.


 

It is now the time for us to make a concerted effort to woo back those buyers, who have been our regular clients, but they had to scale down their operations in view of slump in their consumer markets. They should be in better position now to place orders, not only for replenishing their dried up inventories, but also for meeting the continuing demand. This can be done by orienting ourselves to their requirements, be these the prices, the adherence to the delivery schedules or the quality of product; in fact, all three of these together. It, however, needs to be remembered that we are not the only one who would doing that; perhaps our competitors would be already on the job.


What the Government needs to do


For India, to reverse the declining trend of our exports, our exporters would need support from the Government, which, by any recent past experience, has been inadequate. We have been ascertaining the views of individuals and of organizations and submitting to the Government from time to time for its consideration. There have been long lists of demands, supported by longer lists of reasons as to why their demands need to be met with. This time around, the demands being listed by some of the trade bodies relating to textile and garment sector, were the similar, as they have been raising year-after-after on the Budget eve. Others preferred not to even respond; for they realized they have nothing to suggest or offer anything substantive. I shall so assume unless informed otherwise.


Having lived through cycle of expectations and disappointments, and without any suggestion from anywhere within the industry or outside, I have thought of a way-out, which, if considered thoughtfully, would be found acceptable by the Government, which should also meet the most of the genuine needs of the garment trade and industry.


I suggest that the Government of India well as the States should treat exporting units at par with those located in Special Economic Zones.


Of course, it is no big deal. This demand has been raised several times, year-after-year by some trade bodies, particularly Delhi Exporters Association. But the same has not been granted, even if considered. Yes, it was not granted and there are doubts if it was actually-and thoughtfully-considered by the Government. Why? One reason that I can attribute to its failure to get due and deserving consideration is that this demand has been made as one of the several other demands, including those, which were not that robust and convincing. Anything coming in the form of Magnacarta is unlikely to get due and deserving consideration these days, particularly when we are raising this question at that point of time when the representations making various demands are deluging the corridors of North Block.


Why Government Should Accept SEZ Status for Export Units?


Since the Government has already accepted the principle of Special Economic Zones, whose express purpose is to promote exports by providing all the infrastructural facilities at a given place and insulate such industries from taxes, levies and kinds of forms of costs, which increases their transaction costs, it can logically be assumed that the Government is committed to, in principle, of creating special infrastructural facilities, apart from not subjecting these industries to any taxes and levies, in order to provide them with level-playing field.


If we extend the same logic to the textile and garment exporting units, these should also be given the same set of facilities that are being provided to units located in SEZs. The Government has no logical reason for disallowing non-SEZ units. As a former public servant, I can state that each Government action has to conform to what is known as Public Interest. The Government also cannot be discriminatory in favour of one against another unit without a given and specific public interest being served. I personally see no public interest being served by the Government by extending one set of concessions to one group of industries i.e. those set up in SEZ areas, at public exchequer, and thereby discriminate against the units that are in non-SEZ areas.


I must, however, clarify that my proposed extension of SEZ norms would be limited only to tax concessions both in terms of customs and internal taxes in all forms and kinds. This is precisely to exclude provision of infra-structural facilities that would not be possible for an individual or even a group of textile and garment units already functioning in isolation to each other. While making suggestion that 100% export units should be held at par with those located in SEZ areas, I am only referring to the spirit not the letters that should be important in such cases.


 

Why Industry Should Accept SEZ Status for Export Units?


If you look up the number and kinds of common demands that are being made by the industry and faithfully raised on the Budget eve, most of them would be subsumed by treating non-SEZ garment exporting units at par with those located in SEZ areas.


Do I need to add anything more than that? I do not think so.


In any case, when there is heavy constraint of funds with Government of India with fiscal deficit reaching an all-time high of 6.8% of gross domestic product, and with the two wings of the Government locking horns on the percentage increase for Budgetary support (Planning Commission is asking for 18% and Finance Ministry sticking on to 11% ), which, even if granted, would be lowest increase over in several years (which was 26.6% in 2004-05, 27.8% in 2005-06, 29.1% in 2006-07, 28.8% in 2007-08, 31.4% in 2008-09 and an estimated 31.9% in 2009-10).


Let the textile and garment export trade drop all their present demands and seek only what the Government has already granted, both in principle and practice, to export units in SEZ areas, but denies the same, selectively and discriminately, to such units, as are located outside the locations called SEZs.



The views presented here are authors personal views. Here I refers to him