Govt to encourage PEs in textile sector: Mr Sajjan Jindal

13 Aug '08

4 min read

Underlining the need of fresh investment in capacity expansion, modern technology and machines, The Associated Chambers of Commerce and Industry of India has suggested entry of the global manufacturers and private equity funds in Indian textile sector to invest in partnership with the small-scale textile units based in India.

Textile sector, victimized by strong Rupee, is suffering from rigid labour laws, technology obsolescence, fragmented structure, infrastructure constraints and lack of iconic brand which has disabled its growth potential and competitiveness in international market, an ASSOCHAM report on `Indian Textiles Sector' has stated.

“Government should provide appropriate fiscal incentives to the parties interested in investing in textile and clothing to enhance the attractiveness of the sector”, said ASSOCHAM President, Mr. Sajjan Jindal.

In a report brought out by ASSOCHAM on Indian Textile: Weaving Global Spin, it is recommended to the government to draft a five-year agenda and work jointly with industry and labour unions to refine these laws in a phased approach towards the integrated development of industry and workforce.

As the textile sector is struggling with declining exports due to strong domestic currency, the report stated that Indian textile and garments exports are highly concentrated in the regions of America and European Union.

Huge opportunities lie for the strategic expansion of the export market in the regions of Middle East & North Africa and Sub-Saharan Africa but the high risk nature, massive investments and unstable economic conditions at the short term period calls for special fiscal and monetary incentives to be given for the new ventures for a specified time period.

The report has identified that Special Economic Zones for Textiles and boom in the retail industry are expected to provide necessary boost to the domestic demand and production.

The highly fragmented nature of the industry calls for gearing of mergers and acquisition activity which could pull through investment and facilitate technology modernization and market expansion.

It says that the textile SEZs would help in growth of the sector by providing better pricing option due to cost efficiency, brand promotion, reach to wider market network in international markets and by showcasing India's textile and garment products.

“Government should give additional incentives to the small and medium enterprises investing in manufacturing and export operations in the textile SEZs in order to harness their full potential”, commented ASSOCHAM Chief.

ASSOCHAM has also strongly proposed to incentivise the firms going global to form joint ventures, partnerships, franchisee or takeovers as this would help in expanding the market, creating brand value and help in catering the needs for latest technology in the industry.

The report findings have shown that the textile sector which contributes 10.9 per cent in IIP and 13.73 per cent in manufacturing has grown at the compound annual rate of 4.6 per cent during the period FY01 to FY07 while IIP and manufacturing index grew by 6.9 and 7.4 per cent.

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