By Radharaman Hari Kothandaraman
Although this year’s budget avoided too many sector-specific announcements, the only sector that should have deserved special attention was the textile and clothing industry, the second largest job generator in the country.
Given the context of the Covid-19 pandemic and its negative impact on employment and consumption, one would have thought that textiles would have received special attention in this budget from the Minister of Finance.
After a dramatic decline in demand in 2020-2021, the textile and apparel industry has made a steady comeback in the current fiscal year thanks to a rebound in exports and a revival in domestic demand. The industry is far from out of the woods, however, facing a long road to recovery due to several headwinds.
The sector has for many years faced enormous competitive pressure from rival textile exporting countries such as Pakistan, China, Vietnam and Bangladesh and has recently been plagued by an unprecedented rise in the cost of many incoming raw materials which reflected the boom in the global raw materials market. prices.
Additionally, recent talks over a proposal to hike the GST on textiles have significantly dampened confidence in an industry that was once by far the largest industrial sector in the country. With consumption weak due to successive local and national lockdowns, the sector was in desperate need of positive policy measures in this budget.
As the second largest source of employment in India after agriculture, the textile industry should be seen as a strategic sector that could be used to boost both consumption and employment, thus creating a multiplier effect on the economy. economy.
Given the emphasis on infrastructure creation and sustainable development underlined by the Minister of Finance, it might have been useful to allocate funds for the establishment of centralized effluent treatment plants in textile clusters across the country to manage the dye effluents that the industry produces in large quantities each year. This could, in addition to reducing pollution of our water bodies, allow the industry to position itself as a sustainable fashion leader in the global fashion industry.
Another initiative that could have had a considerable positive impact is the granting of enhanced minimum support prices on agricultural activities linked to the sector such as cotton and sericulture. This would have led to long-term incentives for farmers in these sectors, thus ensuring commodity price stability in the years to come.
As a temporary measure, the government could at least also have considered interest rate subsidy programs for loans granted to this sector for a minimum period of one year – a measure that could avoid a build-up of bad debts and a future crisis of confidence among lenders in lending to industry.
The country’s textile sector is not limited to large garment units and factories. A large majority of its capacity comes from semi-organized rural artisans who are not covered by any of the government programs. To help this critical section of the rural workforce, the government could channel some of the funds through its rural employment guarantee programs (such as MGNREGA) to artisans employed either by private contractors, NGOs or cooperatives in rural areas, thus strengthening artisan communities across the country. to get better wages and job dignity, especially in these difficult times.
Many artisans in remote parts of the country find it difficult to stock raw materials in advance due to a lack of adequate working capital, which makes them vulnerable to sudden increases in raw material prices. Lack of access to capital therefore further handicaps the handloom sector which faces strong competition from cheaply manufactured substitutes that are often imported into the country. Giving priority sector status to the hand weaving and handicrafts sectors and better access to credit through microfinance institutions would greatly benefit these small entrepreneurs.
Finally, given the upcoming deliberations in the GST Council on the proposal to increase GST rates on textiles, it is hoped that the Union Government will use its substantial voice in the Council not only to postpone the rate hike, but also to reduce the GST on labour-intensive textiles. such as looms to stimulate demand and encourage more employment in a sector that probably remains one of the largest segments of the economy not covered by most government economic incentives.
Radharaman Hari Kothandaraman is the Founder, CEO and Lead Designer of The House of Angadi. He is also creative director of design brand Advaya and recently launched international luxury ready-to-wear brand, Alamelu.
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