The textile sector is on the cusp of a growth period – exports are improving and a robust domestic offtake is keeping garment manufacturers optimistic. Though there are some issues in yarn shipments and dye manufacturing, the sector is still better off from what it was a year ago.

At the time of the 2013-14 Budget, the industry was hit by currency volatility and slowing global trade on account of the economic slowdown. Exports during 2012-13 fell 4.2 per cent to $31.7 billion, against $33.3 billion in 2011-12. The previous Government energised the loan scene for handloom weavers through concessional term-loan rates at six per cent and interest subvention schemes.

Manufacturing was jump-started by fresh allocations for manufacturing parks, and the flagship Technology Upgradation Fund Scheme continued into the Twelfth Plan period with an investment target of Rs 1.5 lakh crore. Excise duty on branded garments was cut to zero from 3.5 per cent, costing the exchequer Rs 1,300 crore. Coinciding with a recovery in Western markets, however, these measures yielded results.

In a telling turnaround, spun yarn production increased 10 per cent and 2 percent more cloth was manufactured during first half of fiscal 2013-14. Exports of cotton yarn and fabrics spurted to Rs 54,039 crore for 2013-14 (Rs 40,946 crore the previous year).

“Yarn exports have been very good this year,” says DL Sharma, Managing Director, Vardhman Yarns & Threads, part of the $1-billion turnover conglomerate Vardhman group of companies. The company exported 1,250 million kg of yarn, up from 970 m kg during 2012-13.

However, fresh issues have cropped up, forcing the industry to look to the Government for solutions. One is China’s decision to cut down on yarn imports and release its huge stock of cotton to its mills, effectively taking away India’s largest yarn buyer. “China’s buying during April-May this year is 10-12 per cent lower than last year. This has forced us to look at new markets such as Bangladesh, Vietnam, and some European countries,” he said.

To help yarn exporters, the Government needs to renew efforts to seal a Free Trade Agreement with the EU to spur exports from the current $15 billion. “Bangladesh, which has such an agreement, exports textiles worth $22 billion,” says A Sakthivel, textile exporter and President of Tirupur Exporters Association.

The Tirupur textile manufacturing hub in Tamil Nadu accounts for over 45 per cent of the country’s knitwear exports, and is just emerging from the effects of crippling power outages. In 2013-14, this cluster recorded a 30 per cent increase in exports, at Rs 17,800 crore, and is hoping for a slimmer duty structure.

The Government now imposes Customs duty on import of machinery and special fabrics. “Winter garments are a big market for Tirupur exports and some fabrics need to be imported for their production,” said Sakthivel, adding that export duty credit to offset the import duty on these fabrics will encourage trade. Sakthivel says the industry has also requisitioned the Government to cut Customs duty on dye intermediaries and basic chemicals to help offset price inflation.

The Finance Ministry appears favourably disposed to giving the industry some incentives. Minsitry officials told Business Line the Union Budget 2014-15 may spell out incentives for exporters targeting the US and the EU under the market-linked Focus Product Scheme.

Despite budgetary boosts, the industry is is plagued by a perennial shortage of labour. Garment manufacturers have sought an amendment to labour laws to provide for structured compensation for employees working overtime. KR Nagarajan, who runs textile brand Ramraj Cotton, says it is increasingly getting difficult for textile factories to get labour.

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