A senior government official has predicted that India's textile industry stands to lose between Rs 8 billion and Rs 9 bn per year after the introduction of an optional Central Value Added Tax (Cenvat).

The speculation by Atul Chaturvedi, Joint Secretary in the Ministry of Textiles, follows Finance Minister P Chidambaram's abolition of mandatory Cenvat in the textile sector, which means under the exemption route excise duty is only applicable to manmade fibre and filament yarn.

However, Chaturvedi said that initial response to the new regime had been encouraging.

He added: "…around Rs 600 billion of investment is expected in textile sector in next three years and one million new jobs are expected to be created."