The textile sector has finally started showing some signs of recovery after a challenging period of demonetisation, the implementation of the goods and services tax (GST) and appreciation of rupee, coupled with high cotton prices.
Quoting the RBI Financial Stability Report, June 2018, the Confederation of Indian Textile Industry (CITI) said stressed advance ratio of the textile sub-sector had improved in March from the levels in September.
CITI Chairman Sanjay Jain said recovery was expected, owing to rupee depreciation, pick-up of domestic demand and progressive policies of the government. The government’s incentives, including Rs. 1,300-cr Samarth Scheme for skilling, Rs. 6,000-cr package for the apparel and made-ups, along with various state sops, are expected to turn around textiles & clothing sector and put it back on growth path. The government had also been receptive in resolving many GST issues, though there were still a number of glitches which the industry was hopeful to find a solution shortly, he added.
In FY18, textiles and apparel imports have touched $7 bn, 16 per cent higher than the previous financial year’s value of $6 bn. All the categories across the value chain have seen a drastic rise in imports. For example, fabric imports grew 27 per cent in FY18 to Rs. 2,336 cr, against Rs. 1,834 cr in FY17. Similarly, apparel imports grew 30 per cent to Rs. 773 cr as compared to Rs. 595 cr in the FY17, he said.
The only urgently required and the missing piece in the jigsaw is government support for curbing excess imports and refund of all duties and taxes on exports across the value chain. Moreover, the embedded duties, which are in the range of 4 per cent to 6 per cent across the value chain, are not getting refunded. This was one of the key factors for decline in exports, apart from blockade of funds due to delay in GST refunds and rupee appreciation, he added.
According to Jain, the biggest game changer that could transform the industry and put it at par with its competitors, such as Vietnam and Bangladesh, is Free Trade Agreement (FTA) with the European Union, Australia, Canada and Britain for made-ups and garments, and reduction of import duty on Indian cotton yarn and fabric by China. The industry is optimistic that the government would intervene in the matter and continue to support.