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ASSOCHAM - Deregulate handloom sector to attract FDI in textile

06
Nov '08
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has suggested complete deregulation of India's handloom sector with flexibility in labour laws to help textile economy attract FDIs, upgrade technology and generate employment in Chinese way which spurred spectacular growth in its apparel export industry.

In a SWOT Analysis on `Textile Sector of India' undertaken by ASSOCHAM, it has been pointed out that the total FDI's approval in India in last 15 years stood at Rs.40 billion of which less than Rs. 3 billion were approved until recently.

This has happened because domestic textile sector continues to struggle under shackles of stringent laws and has yet to be deregulated as against China in which the actual FDI's are 50 times higher and its textile industry and exports are doing remarkably well.

Releasing the Paper, the ASSOCHAM Secretary General, Mr. D S Rawat said that the technology upgradation fund schemes (TUFs) for the sector was introduced in March 2006 but majority of investments that took place in textile sector went out of it. This means that textile units had chosen to invest by not taking recourse to TUFs route.

Another disturbing feature is that FDI's attracted by domestic textile sector continue to remain quite low as in last 14-15 years, out of total FDI's attracted, textile sector contributed less than 2.5%, added Mr. Rawat.

He suggested that flexibility in labour laws in changed economic, commercial and fiscal policies be considered. Amendments are required to help free outsourcing to promote investment in labour intensive and export oriented garment sector. Contract labour norms should be liberalised for textiles and garments so that units can hire labourers for a few months without the compulsion of having to absorb them permanently.

Infrastructure and power sector reforms should be undertaken at a high speed to facilitate the smooth functioning of the industry. India has high energy and capital costs, multiple taxation and low productivity, all of which add to production costs. As a result, textile and apparel products from India are less competitive than those of China and other developing countries.

The Paper points out that there are opportunities as well as threats for the Indian textile industry in the post-MFA era. India has inherent strengths which can be capitalized on strong raw material base of cotton, man-made fibers, jute, silk, large production capacity (spinning 21% of world capacity and weaving 33% of world capacity) vast pool of skilled manpower, entrepreneurship, flexibility in production process and long experience with US, EU.

At the same time, there are weaknesses relating to fragmented industry, constraints of processing, quality of cotton, concerns over power cost, labour reforms and other infrastructure constraints and bottlenecks. India is likely to face intense competition both domestically and internationally from other low-cost exporting countries.


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