INDIA: Textile firms disappointed at lack of budget support
India's textile makers have expressed disappointment after the country's interim budget failed to include any measures to help the sector tackle the global economic slowdown.
Firms had been hoping for a lower interest rate on working capital, a two year moratorium on the repayment of loans, and a nine-month credit period for working capital in the interim budget for fiscal 2009/10 unveiled yesterday (16 February).
In the event, the government extended a 2% interest rate subsidy on bank loans to exporters beyond its expiry on 31 March, but failed to restore it to an earlier level of 4%.
The lack of incentives was in stark contrast to measures announced in December, when the government outlined plans to spend an extra $4bn in the final four months of its fiscal year to try to boost growth in labour-intensive export industries such as textiles and apparel.
Incentives and tax reductions introduced until the end of March included a refinance facility for small and medium industries, a 4% cut in the central value added tax (cenvat) rate to encourage additional spending, and pre and post-shipment export credit on labour intensive exports such as textiles and clothing.
For textile firms, an additional INR14bn was made available to clear the backlog in the technology upgrade funding scheme (TUFS).
Exporters were also be allowed a refund of service tax on foreign agent commissions of up to 10% of the FOB value of exports.
However, even this was not enough for many export-oriented textile firms who said the December package did not do enough to help them.
They called for more concrete measures to help fight a slump in demand from customers in the US and Europe.
Last September, India's government cut duty drawback rates for cotton apparel from 11% to 8.8%, for blended apparel from 11.2% to 9.8%, and for synthetic apparel from 11.5% to 10.5%.
However, a report published at the end of last year said recession in international markets, foreign exchange losses and high input costs are all going to combine to make 2009 a grim year for the Indian textile and apparel sector.
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