The fund allocation for the labour-intensive textiles sector —which provides jobs to about 45 million people—in Union Budget 2018-19 increased 14.7 per cent to ₹7,148 crore over the previous year.

The rate of growth in allocation for the new fiscal, however, is less than half of the increased allocation of more than 30 per cent to ₹6,226.5 crore in 2017-18.

The textiles industry had sought higher allocation from the government to meet the requirements of duty drawback and refund of state levies (ROSL) under the new GST regime. It also demanded higher disbursement under the Amended Technology Upgradation Fund Scheme (ATUFS).

"Adequate budgetary allocation for schemes such as refund of state levies and interest subvention benefits can help improve competitiveness of textile exporters and improve textile exports growth," ICRA had said in a pre-Budget note.

While allocation for the ATUFS has been increased to ₹ 2300 crore in 2018-19 from ₹ 1956 crore in 2017-18, it is still lower than the allocation of ₹ 2622 crore made in 2016-17.

Provision for ROSL for 2018-19 is higher at ₹2,222 crore compared to ₹1,939 crore last year, but it remains to be seen whether it would be enough to refund all state levies that the industry is paying.

As per calculations made by the industry, under the new GST and drawback rules, the reimbursements of taxes for the sector has gone down to the extent of 7 per cent (of the value of exports), whereas an additional incentive of 2 per cent has been given to the sector in the foreign trade policy review in December. This resulted in a shortfall of 5 per cent which was leading to a fall in exports, according to the Apparel Export Promotion Council (AEPC).

Exports of garments and textiles declined 3 per cent in December 2017 to $2.99 billion, although in the April-December 2017 period it posted a growth of 2 per cent at $26.13 billion.

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