$3bn worth of additional exports could be generated in Indias apparel, leather and footwear sectors

$3bn worth of additional exports could be generated in India's apparel, leather and footwear sectors

India's textile and apparel industry is banking on informal assurances of increased central government support, after it was largely ignored in this month's formal announcement of the national budget.

Harminder Sahni, managing director of consultancy firm Wazir Advisors, said that while finance minister Arun Jaitley had not mentioned specifics in his budget speech, "we have been told by the Ministry of Textiles that all its plans are approved and [the sector] will get [extra] money".

Sahni was referring to the Ministry's plan to increase funding for schemes including duty drawbacks (refunds), skills development and technology upgrades from INR40bn (US$588m) to INR65bn.

Despite these assurances, there has been concern in the country's clothing and textile sector that the 58-page budget speech almost ignored the garment and textile sector. 

Ujwal Lahoti, chairman of the Cotton Textiles Export Promotion Council, told just-style the industry is disappointed that a demand for a restoration of interest rate subsidies for cotton yarn exporters had not been accepted. "Hopefully this will also be done in the near future," he said.

India's clothing, textile and footwear sector has the potential to significantly boost exports according to the government's India Economic Survey 2016-17, released on 31 January. It argued that $3bn worth of additional exports could be generated in the apparel, leather and footwear sectors.

To achieve this goal, the survey said the government need to be more proactive in seeking to negotiate free trade agreements with the European Union (EU) and the UK. "The potential gains for export and employment growth are substantial," it said. "Apparels are 80-fold more labour-intensive than autos and 240-fold more jobs than steel."

The survey also said that subsidies approved by the government for textiles and clothing in June 2016 will help apparel exporters by offsetting the impact of state taxes, which could be as high as 5% of export costs. "Similar provisions for leather exporters would be useful," it said. "This is not a subsidy but really a drawback scheme that should be [World Trade Organisation] WTO-consistent because it offsets taxes on exports."

Exporters of home textiles have also been included in the duty drawback scheme, but according to Lahoti, they are still awaiting the rate of state levy refunds that will be permitted. "Once it gets notified, then we expect the growth of home textiles," he said.

A Sakthivel, president of the Tirupur Exporters' Association said clothing exporters are also banking on the government's announcement in the budget to spend INR3.96trn on improving the country's infrastructure. "The road transport will improve and that would also help the exporters," he told just-style.

However, the most anticipated regulatory reform affecting the industry remains the adoption of Goods and Services Tax (GST), now expected by September, which will simplify India's sales taxes. "We are primarily looking for a good GST regime," Rahul Mehta, president of the Clothing Manufacturing Association of India told just-style.