Finance minister P. Chidambaram has laid the Budget for 2013-14. What's on the cards for the textile sector?


The2013-14 Budget presented by the finance minister is one of the most positively expected budgets in the recent years. It is optimistically believed to turn around the fortune of Asia's third biggest economy after years of economic bedlam. The report is expected to curtail fiscal and current account deficits. Present deficits of the nation have shocked the rating agencies, and have further triggered warnings that India's sovereign bonds are to be downgraded.

A report prepared by Raghuram Rajan, former chief economist of IMF states that India is likely to hit a fiscal deficit of 5.3% GDP this year. Economic growth is also anticipated to be sluggish by 5%.A deficit of 5.3% of GDP would remain among the BRIC countries. India's deficit has become an issue as it is likely to create two problems; high level of inflation, and current account deficit.


Indian currency has lost 18% against the dollar during 2011. It was able to make up for this loss during 2012 with a decline limited to 3.5%. Since the beginning of this year rupee has gained 1.2%. Weak US economy and Eurozone crisis has been behind India's poor performance. Government's tentativeness in attracting foreign capital and ballooning current account deficit has left India at a possible risk of downgrading its sovereign debt credit rating.


India is currently running the widest current account deficit ever, which needs to be financed by huge capital inflows such as FDI, FII flows, and borrowings. The country's current account deficit for the second quarter of 2012-13 was 5.4%. Net FII inflows during the period April-January was $19 billion and this helped to restrict the deficit. Subsidizing Eurozone crisis and quantitative easing in the US has motivated FII inflows. Economic initiatives announced during 2012 September has also encouraged foreign investors.

Benefits to the textile sector:


The budget provides some key incentives to the Indian textile and apparel industry.

  • The Finance minister has proposed to continue the TUFs (Technology Upgradation Fund) for the textile sector with an investment target of `1, 51,000 crore. Much focus would be on the powerloom sector. `2,400 is allotted for the sector under TUFs.

  • Textile parks set up under the Scheme for Integrated Textile Parks (SITP) have been allotted an incentive of `50 crore. There would be an additional grant of `10 crore to each part.

  • A new Integrated Processing Development Scheme will be implemented in the 12th Plan addressing the environmental concerns of the textile sector.

  • Majority of the weavers in the handloom sector are women, and particularly from the backward classes. Handloom sector is provided term loans and working capital at a concessional interest rate of 6%. 1, 50, 000 individual weavers and 1,800 primary co-operative societies will be benefited out of this. An additional sum of `96 crore will be allotted to the Ministry of Textiles during 2013-14 for interest subvention.

  • Handmade carpets and textile floor coverings of coir and jute will be completely exempted from excise duty.

  • India has a rich heritage of Khadi industries. The 12th Five Year Plan provides an outlay of `850 crore. The Scheme of Fund for Regeneration of Traditional Industries (SFURTI) will be extended to 800 clusters during the 12th Five Year Plan.

  • Companies investing more than rs.100 crore in plant and machinery during the period April 1st 2013 to March 31st 2015 will be eligible for a 15% investment allowance.

  • Changes will be made in the Foreign Trade Policy and initiatives will be taken to support exports of goods.

P. Chidambaram said that India must make tough spending choices. With an intention to induce growth, the finance minister has drummed up the budget, which spells opportunities for the textile sector. Budget is chalked out suggesting economy is turning around with the core sectors and manufacturing units showing recovery signs. It also claims to achieve a faster, sustainable, and a better inclusive growth through the 12th Five Year Plan.


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Indiabudget.nic.in