The Hindu Business Line : Textile industry hopes high in post-quota regime

With the 2006-07 Union Budget having provided excise duty cuts to man-made fibres and cuts in the ad valorem component of customs duty on fabrics and garments and in the customs duty of specified textile machinery, the textile industry is gung-ho about the growth prospects for the short to medium term future to face the competition head-on in the post-quota regime.

Sources in the Government told Business Line here that a conservative estimate made by the industry reckons that in order to achieve a turnover of $85 billion in textiles and clothing by 2010 with $40 billion for export and $45 billion for internal consumption, the industry needs to invest a whopping Rs 1,40,000 crore.

Technology upgradation

Out of this massive investment, as much as Rs 70,000 crore must be for only acquiring textile machinery for modernisation and upgradation of technology, they said, adding that the recent budgetary proposals for cutting down customs duty on specified textile machinery would help in the import of latest machinery needed by the indigenous industry. It is to be noted that as per the WTO figures, the world market in textiles was $195 billion and for clothing it is $258 billion for 2004.

As per the industry's textile vision, they said the Indian textile industry is likely to achieve 6 per cent share of world market by 2010 and would generate an additional employment of 12 million (i.e., five million through direct employment and 7 million jobs in allied sectors).

Flexible labour policy

The sources said that as the Budget did not address other issues such as flexible labour policy and continuation of Technology Upgradation Fund Scheme beyond its expiry period, hopes run high among the stakeholders that the Group of Ministers (GoM) headed by Mr Sharad Pawar would address these issues to provide some comfort to the industry. The GoM consists of Ministers like the Commerce & Industry Minister Mr Kamal Nath, the Finance Ministser, Mr P. Chidambaram and the Textiles Minister Mr Shankersinh Vaghela, besides the Planning Commission Deputy Chairman, Mr Montek Singh Ahluwalia.

The GoM is also expected to thrash out important issues such as providing some sort of compensation for infrastructure inadequacies and exchange rate fluctuations to exporters, besides ensuring the reimbursement schemes such as duty drawback and DEPB.

Encouraging trend

The sources said that trends in textiles and clothing export in the post-quota period were encouraging. For instance, they said that India's exports of apparel to the 25-member European Union (EU) rose by 17 per cent in dollar terms during the January-October 2005 period. India's exports to the US, the single largest and significant market, registered a growth of 26 per cent for the January-December 2005 period, they said, adding that comparisons with China could not be proper because despite restraints they enjoy exceptional endowments in terms of power cost, fixed exchange rate and economies of scale.

That is the reason why the GoM headed by Mr Pawar has been set up to provide an enabling milieu to the domestic industry by sorting out inter-ministerial problems in a holistic manner.

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