TEXTILE INDUSTRY IN INDIA

WHY IN NEWS:

• The textile industry here has welcomed the Production Linked Incentive (PLI) scheme announced by the Central Government in November 2020. The scheme provides incentives for manufacture and export of specific textile products made of man-made fibre (MMF).

SIGNIFICANCE OF TEXTILE SECTOR

• Contribution of the industry in India’s GDP and exports:
  • The sector accounts for 7% of India’s manufacturing output, 2% of GDP and 12% of exports
• Employment generation:
  • Textile industry is labour intensive and employs directly and indirectly about 10 crore people.
  • It is a source of employment both in rural and urban areas
• Position of India in global market:
  • India is the largest producer of cotton, accounting for 25% of the global output.
  • India is the world’s second-largest producer of textiles, garments and man-made fibres after China.
• Cultural significance:
  • The textile industry has been a symbol of India’s cultural heritage.
  • It represents a rich and diverse spectrum of activities with the handwoven sector on the one end and the capital intensive mill sector on the other.
• Role in increasing farmer’s income:
  • Textile industry needs raw material which is mostly procured locally. For instance, cotton is the main material used for the production of yarn and cloth.
  • The development of the industry encourages farmers to grow more cotton, which leads to income generation in the agricultural sector.
• Earns huge FER:
  • The industry plays an important role in providing foreign exchange resources by exports.
• Technical textiles hold immense growth opportunities in India:
  • The scope of use of technical textiles encompasses a wide range of applications such as; agro-textiles, medical textiles, geo-textiles, protection-textiles, industrial-textiles, sports-textiles and many other usages.
  • Use of technical textiles have benefits of:
    • Increased productivity in agriculture, horticulture and aquaculture fields
    • Better protection of military, para-military, police and security forces
    • Stronger and sturdier transportation infrastructure for highways, railways, ports and airports
    • Improving hygiene and healthcare of general public.
• Women empowerment:
  • Textile industry plays a significant role in women employment, especially in rural areas.
  • According to CMIE (Centre for Monitoring Indian Economy) the industry provides employment to about 15 million women.

CHALLENGES IN TEXTILE SECTOR

• Highly fragmented:
  • The Indian textile industry is highly fragmented and is being dominated by the unorganized sector and small and medium industries.
• Lack of trade agreements:
  • India’s competitors in textile manufacturing such as Bangladesh and Vietnam have trade agreements with western markets.
  • For example: Vietnam has signed an FTA with the EU and its apparel exports will face no duty from September 2020. However, India’s FTA negotiation with the EU has remained suspended since 2013; and our export faces 12-14 per cent import duty.
• Outdated technology:
  • The Indian textile industry has its limitations of access to the latest technology (especially in small-scale industries) and failures to meet global standards in the highly competitive market.
• Inflexible labour laws:
  • India's system of labour regulations is rather complex.
  • Several labour laws put limitations on firm size and not allow manufacturing firms to grow.
• Tax structure issues:
  • The tax structure GST (Goods and Service Tax) makes the garments expensive and uncompetitive in domestic as well as international markets.
  • GST for man-made fibres (MMF) are taxed at 18 per cent for fibre, 12 per cent for yarn and 5 per cent for fabric >> This inverted tax structure makes MMF textiles costly
• Stagnant exports:
  • The export from the sector has been stagnating and remained at the $40-billion level for the last six years.
• Lack of scale:
  • The apparel units in India have an average size of 100 machines which is very less in comparison with Bangladesh, which has on an average of at least 500 machines per factory.
• Lack of foreign investment:
  • Due to various challenges >> the foreign investors are not very enthusiastic about investing in the textile sector
  • The industry attracted Foreign Direct Investment (FDI) of only US$ 3.41 billion from April 2000 to December 2019.

INITIATIVES:

• Attracting Foreign Investments:
  • India has allowed 100% FDI in the Indian textiles sector under the automatic route.
• Mega Investment Textiles Parks (MITRA)
  • To enable the textile industry to become globally competitive, attract large investments, boost employment generation and exports.
• Overseas assistance:
  • Between 2011 and 2018, India implemented a Cotton Technical Assistance Programme (Cotton TAP-I) for seven African countries
  • The technical assistance focused on improving the competitiveness of the cotton and cotton-based textiles and apparel industry in these countries
• National Handloom Development Programme (NHDP):
  • It is a Central Sector Plan Scheme formulated for its implementation during 2017-18 to 2019-20.
  • The scheme will follow need based approach for integrated and holistic development of handlooms and welfare of handloom weavers.
  • Key components of the scheme:
    • Block level cluster projects
    • Handloom marketing assistance
    • Concessional credit
    • Third party handloom census and validation of data regarding number of handloom weavers, number of handlooms etc
• Promotion of technical textiles:
  • National Technical Textiles Mission:
    • It aims to position the country as a global leader in technical textiles and increase the use of technical textiles in the domestic market.
  • Mandatory use clause in government schemes:
    • Technical textiles have been identified for mandatory use across various important programmes and schemes of the Government such as National Health Mission, Jal Jivan Mission, National Horticulture Mission and infrastructure development of highways, railways and ports.
  • Separate head in the Harmonised System of Nomenclature code:
    • 207 technical textiles items have been brought under separate head in the Harmonised System of Nomenclature (HSN) code under the Foreign Trade Policy.
• Scheme for Integrated Textile Park (SITP)
  • It provides support for creation of world-class infrastructure facilities for setting up of textile units, with a Government of India grant up to 40% of the project cost.
  • For example Eco-Tex Textile Park at Bareily
• SAMARTH
  • It is a skill development scheme for capacity building in textile sector, covering the entire value chain of the textile sector
• Integrated Scheme for Development of the Silk Industry
• Development of Jute Sector
  • JUTE – ICARE
    • To promote scientific practices related to Jute Cultivation for quality and quantity improvements.
  • Public procurement:
    • Jute Corporation of India (JCI) procures raw jute at Minimum Support Price (MSP)
  • Incentive Scheme for Acquisition of Plants and Machinery (ISAPM):
    • It aims to facilitate modernization in existing and new jute mills and up- gradation of technology in existing jute mills
  • National Jute Board
    • It implements various schemes for market development, workers’ welfare and promotion of diversification and exports.
  • Protecting domestic industry:
    • In order to boost demand in the jute sector, the Government has also imposed anti-dumping duty on import of jute goods from Bangladesh and Nepal.
• Modernization of handlooms:
  • Yarn Supply Scheme
    • To make available all types of yarn at mill gate price to handloom weavers
  • Yarn Bank Scheme
    • To provide interest free corpus fund to Special Purpose Vehicle or Consortium of Power loom weavers to enable them to purchase yarn at wholesale rate and give the yarn at reasonable price to the small weavers
• Amended Technology Upgradation Fund Scheme (ATUFS):
  • This scheme would facilitate augmenting of investment, productivity, quality, employment, exports and import subsitution in textile industry

WAY FORWARD

• Steps required to formalize the sector:
  • India can make the sector organised by setting up mega apparel parks and common infrastructure for the textile industry.
  • This will increase the scale of production and help Indian players to produce faster and at a lower cost with maximum efficiency in operation.
• Facilitate modernization of the industry:
  • Focus should be on the modernization of the obsolete machinery and technology.
• Need for rational labour laws:
  • Several high-level expert panels have recommended removal of limitations on firm size and allow flexibility in hiring and firing.
  • Thus, there is a need for early rationalisation of such labour laws.
• Increasing export:
  • India also needs to sign trade agreements with developed countries to enhance export opportunities.
  • Such Free Trade Agreements (FTAs) can help gain duty-free access to large textile markets such as the EU, Australia and the UK.
• Rationalize our tax systems:
  • India needs to have a fibre neutral tax policy to be a serious player in the global market.

PRACTICE QUESTION:

Q. “Indian textile and clothing sector has several opportunities in the infrastructure and healthcare sectors”. Commen