IMPRESSIONS from a Cross-section


Industry reaction to Union Budget 2021-22

Great step towards realising end goal of 'AtmaNirbhar Bharat'
The Indian textiles and clothing industry welcomed the Union Budget 2021-22 presented by  finance minister Nirmala Sitharaman in Parliament on February 1. While the setting up of 7 mega textiles parks under MITRA and reducing duty on nylon raw materials were lauded by trade bodies, there was a mixed response  to the 10 per cent import duty on cotton. Fibre2Fashion spoke to several industry stakeholders to know their overall views.

"The government well recognises the fact that the textile industry significantly contributes to the Indian economy and creates huge employment opportunities to the masses, especially to the poorer sections of the society majorly covering illiterate and down-trodden women. To further enhance this scope and achieve the target of making Indian economy a $5-trillion economy by 2025, reduction of customs duty on caprolactam, nylon chips and nylon fibre & yarn to 5 per cent is step in the right direction. This will bring nylon chain on par with polyester and other man-made fibres. "I also welcome the rationalisation of exemption on import of duty-free items as an incentive to exporters of garments, leather, and handicraft items. All these items are domestically produced in excellent quantity and quality by our MSMEs and help the textile industry and exports too."

"The announcement on the 7 Mega Textiles Parks was the highlight of the Budget directly impacting the textile industry. This is in line with the Government's intention to encourage mega projects and increasing the scale of operations in the textile industry. This has to be applauded. A particular positive aspect of this scheme is the incorporation of 'Plug & Play' model which will enable the members of such parks to avoid huge capital expenditure outlays. "Lack of scale has been the bane of our efforts to increase our share in the global trade, especially in the apparel sector. However, the government also has to very closely study why the textile parks have not really succeeded in the past. It is very crucial to avoid errors of omission and commissions in the past. Otherwise, this will remain one more well intended scheme which fails to lift the fortunes of the textile industry."

"I sincerely thank the finance minister for taking care of all the sectors including the apparel sector. This is one of the finest budgets considering the current situation due to the coronavirus pandemic. All key sectors like health, agriculture, infrastructure, finance and skilling have been covered well. It will improve the economy. Our main request was related to MMF garments and that has been considered by the government. The 10,683 crore Production Linked Incentive (PLI) scheme for MMF garments and technical textiles, along with new Mega Investment Textile Parks scheme for setting up seven textile parks in India over three years will bring in huge investment in the MMF sector."

"While we appreciate the government policy of making any raw material available at competitive rate by removing the anti-dumping and other import duties, the sudden announcement of levying import duty on cotton has come as a rude shock for the industry that is just coming out of the ill effects of COVID-19. Yet another government policy of addressing inverted duty structure in the GST is also defeated with this levy as the cotton value chain attracts 5 per cent GST and will add the cost to the customers and discourage value addition. "The MSME and decentralised nature of the yarn, fabric and garment manufacturers in the country will not be in a position to take advantage of Advance Authorization Scheme and such scheme would benefit only the vertically integrated units that account less than 10 per cent of the exports."

"The Union Budget for 2021-22 has launched MITRA under which seven textile parks will be established over a period of three years. This is a very positive step which will enable the textile industry to become globally competitive, attract large investments and boost employment generation. The Budget has reduced the Basic Customs Duty (BCD) on caprolactam, nylon chips and nylon fibre and yarn to 5 per cent. This will encourage the growth of the MMF sector especially the MSMEs. However, the imposition of 10 per cent BCD on raw cotton was surprising. This will make imports of Extra Long Staple (ELS) cotton costly, especially Giza Cotton from Egypt and Supima Cotton from the US."

"Union Budget 2021-22 is welcome as the grant to textile and clothing sector is 3,614.64 crore, which is about 10 per cent higher than the revised budget of 3,300 crore in 2020-21. The Budget also puts emphasis on Infrastructure Development and Research & Capacity Building as the grant for these sectors has been increased by about 43.7 per cent and 77.5 per cent respectively as compared to last year. Share of these sectors in total textile and apparel budget allocation for 2021-22 stands at about 6 per cent and 10 per cent respectively. "The taxation changes proposed in the Budget will help and benefit MSMEs in a big way. Measures taken to simplify GST are praiseworthy with the hope that the government will take corrective measures to smoothen the GST further by removing anomalies such as the inverted duty structure."

"It is a pragmatic Budget presented to address all sectors issues at a time when our economy is getting revived back to normalcy. The allocation of 700 crore for Amended Technology Upgradation Scheme (ATUFs) against ₹545 crore in last Budget will help to clear the pending capital subsidy."

"The thrust given to textile sector in Budget with announcement of 7 MITRA parks is welcome. With the concept of these mega parks with a plug and play model, Indian textile and apparel sector, particularly SMEs, can work on scale and build competitiveness in manufacturing. Further, these parks can be aligned with ESG (Environmental, Social and Governance) goals to attract international buyers as well as investors. The mention of 3-year time period is a welcome one to capitalise the opportunities emerging from brands' China plus one strategy. Tamil Nadu with a robust manufacturing eco-system should work towards getting 2 parks."

"Overall sentiments are positive towards Budget being growth-oriented. It is an attempt to empower the Indian textile industry to become globally competitive, attract large investments, and boost employment generation. The focus is on Atmanirbhar Bharat to promote local business. But the imposition of BCD on cotton is a matter of deep concern."

Published on: 04/02/2021

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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