Policy ecosystem for India's textile sector

4 Years agoAccording to the ‘Vision, Strategy and Action Plan for Indian Textiles and Apparel Sector’, taking all innovative steps in partnership with industry will create additional 35 million jobs in the textile sector by 2024-25.

Textiles are one of the oldest exports from India. Merchant traveller Marco Polo praised Indian textiles in his travelogues by writing about its high quality and far-reaching exports. Embroidered bedspreads, wall hangings and quilts of wild silk on cotton or jute ground from India were popular in China, South-East Asia and Europe.1

The potential of textiles as a solution for reviving the economy can be traced back to India’s independence movement, under the leadership of Mohandas Karamchand Gandhi who fervently advocated domestically produced fabrics.

After independence, the Indian textile industry rapidly grew due to various government policies and domestic factors. By employing 45 million people through direct employment and 60 Mn people indirectly, it is the second-largest employment generating sector after agriculture in India.2 In 2014-15, the textile industry contributed up to 10% to the industrial production and 2% to the National Gross Domestic Product (GDP), according to the Ministry of Textiles.3

In 2014-15, the industry recorded a growth rate of 5.4%. The Indian textiles industry is currently valued at $108 Bn.4 By 2024-25, it will reach the production level of $350 Bn, according to the Ministry of Textiles.5 As far as machinery is concerned, 24% of the world’s spindles and 8% of world’s rotors are present in the country, according to India International Textile Machinery Exhibitions Society (India ITME Society).6

Growth drivers and opportunities in the sector

The textile industry is a diverse sector, which includes everything from small handloom factories to large garment plants. The sector operates in both organised and unorganised forms and is known for its close association with agriculture. The rapid upgradation of factories, labour welfare and strong domestic as well as international demand are likely to drive the growth of the Indian textile industry in the future. Major global garment and apparel brands have started their operations in India. The government is encouraging investment in the textile sector through 100% Foreign Direct Investment (FDI) via automatic route. Invest India, the national investment promotion and facilitation agency as well as an FDI cell has been established by the Ministry of Textiles to provide assistance and handholding support to businesses.7

Technical textiles are another important sector for business in the country. It involves making products such as synthetic geo textiles, polyolefin woven sacks, architectural membranes, artificial turfs, medical gloves etc. Internationally known companies such as Ahlstrom, Johnson & Johnson, Du Pont, Procter & Gamble, 3M, SKAPs and Kimberly Clark already have their units in India to produce technical textiles.8 In 2014, the technical textiles contributed 11.43% to the total textile production in India, according to the Ministry of Textiles.9

The Government of India has launched the following initiatives to strengthen textile production and encourage this industry to cater to the domestic and international markets efficiently.

  1. Scheme for Integrated Textile Parks (SITP)

The Scheme for Integrated Textile Parks (SITP) is at the centre of developing a sustainable infrastructure for the textile sector. Under SITP scheme, the government will provide funding for infrastructure, buildings for common facilities like design & training centre, warehouse, factories and plant & machinery. Till now, 74 textiles parks have been approved and are at various stages of implementation with 18 parks operational, 32 under implementation. The investment of $692 Mn is sanctioned by the government which will create 66,000 jobs.1011

  1. Integrated Processing Development Scheme (IPDS)

IPDS is being implemented to make Indian textiles more competitive and environment-friendly. The government will assist the existing textile processing units to follow relevant environmental standards using latest technology. The process parks created for this purpose will deal with waste water management and promote the use of cleaner technology in the processing sector.

  1. Integrated Skill Development Scheme (ISDS)

Textile weavers and workers lack formal training in using latest technology which reduces their chance to get a better job and higher wages. ISDS plans to bridge that skill gap by training 1.5 million people.  An amount of $300 Mn has been allocated for training by the government for the same purpose. The primary objectives of the program are to standardise courses, increase industry involvement and to set robust monitoring systems in vocational training of the textile sector.12

  1. Amended Technology Upgradation Fund Scheme for textiles industry (ATUFS)

The old machinery and technologies used in the textile industry can affect productivity and safety.  ATUFS is designed to provide incentives to entrepreneurs and business owners for upgrading technologies. A one-time capital subsidy will be offered to business owners from Technical Textiles, Garments, and Weaving. The Central Government will provide 15% subsidy to the garment, apparel and technical textile sectors. This is subject to the ceiling of $4.62 Mn on upgradation.13

Other sub-sectors will receive 10% subsidy for upgradation. A fund of $2.7 Bn has been allocated for ATUFS scheme which was launched in January 2016. The funds will be spent over the span of next seven years. ATUFS facilities are expected to receive an investment of $15 Bn and create 3 million jobs in the country.14

  1. Market Access Initiatives (MAI)

The MAI was launched to promote the Indian exports in a sustained manner. The scheme funds various market studies and surveys to assist exporters. Universities, laboratories, exporters and trade promotion organisations can apply for MAI where the level of assistance is already fixed. The Empowered Committee (EC) chaired by the Secretary (Textiles) looks after the implementation and approvals of various projects under MAI.15

  1. Market Development Assistance (MDA)

In order to encourage exporters to conduct promotional activities for their products, MDA was launched. The Focus export promotion programmes will be organised in specific markets such as Latin American Countries (LAC), Africa and Association of Southeast Asian Nations (ASEAN). The objective of this program administered by E&MDA Division of the Department of Commerce is to develop the already established markets overseas for textile.

  1. Merchandise Exports from India Scheme (MEIS)

MEIS is aimed at stimulating the growth of textiles exports from India in various traditional and emerging markets. The scheme has been finalised after consulting various stakeholders. The market coverage of MEIS scheme has been extended. $3.2 Bn has been sanctioned by the government for the MEIS.  According to the Ministry of Textiles, the textile sector is one of the biggest beneficiaries the MEIS.16

  1. Technology Mission for Technical Textiles (TMTT)

TMMT has two mini missions to create a healthy ecosystem for the production of technical textiles in India. The scheme launched in 2011 for the period of five years has been extended for another two years (2015-17) now. The Mini Mission I of the plan aims at standardisation, creating common testing facilities and several resource centres with IT infrastructure. Under Mini Mission II, support will be provided to create domestic and export markets for the technical textiles. A favourable environment will be created in the technical textiles sector through incubation centres, research and focus product schemes. Northeast India will be given particular attention for the promotion of Agro textiles and Geotextiles.17

  1. Special package for Textile and Apparel sector

The government of India plans to generate over 10 Mn jobs in the textile industry over the period of next three years. The special package will help to achieve this goal by providing incentives to boost exports, labour- friendly policies and scaling up the production. With the implementation of this package, the exports are expected to increase by $30 Bn over the period of three years. The country will also receive investments worth $11 Bn. Tax incentives, fixed term employment and Employee Provident Fund scheme reforms will make the industry more competitive. The garment industry, which employs around 70% women workforce, will be largely benefitted by the special package.18

Implications of Goods and Services Tax (GST) for Indian Textiles Sector

GST is termed as the biggest tax reform since India opened its economy in 1991. The new law regarding indirect taxes will result in ‘Fibre-neutrality effect’ on the Indian textiles sector, according to the Ministry of Textiles.  It means that all man-made and natural fibres will be treated equally from the tax point of view.  This will indirectly encourage product diversification in the industry as manufacturers will consider blending synthetic fibres with cotton fibres.19

The key to restoring the glory of Indian textile industry lies in its productive workforce, safe work environment and the use of latest technology. According to the ‘Vision, Strategy and Action Plan for Indian Textile and Apparel Sector’, taking all innovative steps in partnership with industry will create additional 35 million jobs in the textile sector by 2024-25.20

1. http://shodhganga.inflibnet.ac.in/bitstream/10603/2719/10/10_chapter%203.pdf Page No.64
2. http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/351/1
3. http://texmin.nic.in/sites/default/files/ar_15_16_ENG.pdf
4. http://indiainbusiness.nic.in/newdesign/index.php?param=industryservices_landing/351/1
5. http://texmin.nic.in/sites/default/files/Vision%20Strategy%20Action%20Plan%20for%20Indian%20Textile%20Sector-July15.pdf
6. http://itme2016.india-itme.com/pdfs/Textile_Machinery_Market.pdf
7. http://texmin.nic.in/fdi-cell
8. http://technotex.gov.in/Domestic%20Technical%20Textile%20Industry.pdf
9. http://pib.nic.in/newsite/PrintRelease.aspx?relid=103029
10. http://www.ministryoftextiles.gov.in/sites/default/files/eBook_2yr_ach_eng/MoT_2Year_Progress_Brochure.pdf
11. http://ministryoftextiles.gov.in/sites/default/files/sitp%20new%20park%20guidelines.pdf
12. http://www.ministryoftextiles.gov.in/sites/default/files/eBook_2yr_ach_eng/MoT_2Year_Progress_Brochure.pdf
13. http://pib.nic.in/newsite/PrintRelease.aspx?relid=134032
14. http://pib.nic.in/newsite/PrintRelease.aspx?relid=134032
15. http://texmin.nic.in/sites/default/files/Export%20Promotion%20Schemes-MoT_1.pdf
16. http://pib.nic.in/newsite/PrintRelease.aspx?relid=130173
17. http://texmin.nic.in/sites/default/files/scheme_technical_textile_070116.pdf
18. http://pib.nic.in/newsite/PrintRelease.aspx?relid=146422
19. http://texmin.nic.in/sites/default/files/GST-%20Indian%20Textile%20Sector.pdf
20. http://texmin.nic.in/sites/default/files/Vision%20Strategy%20Action%20Plan%20for%20Indian%20Textile%20Sector-July15.pdf

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