India has seen an economic slowdown following the implementation of the Goods and Services Tax (GST) in July, but a new report says this effect is expected to be temporary and the country is now on the threshold of sustainable growth.
The GST, a single tax on the supply of goods and services from the manufacturer to the consumer, is supposed to simplify sales taxes for clothing and textile companies, replacing a myriad of national, state and local charges. However it has also forced most businesses to report every transaction on the government’s taxation portal.
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In June, the GST Council approved a number of measures including a reduction in the rate of GST on man-made fibres and improved refund procedures, including an e-wallet facility, in order to help exporters.
GST package will give “immediate relief” to India’s apparel sector
According to a joint study by the Associated Chambers of Commerce and Industry (ASSOCHAM) and consulting firm EY, there was a temporary economic slowdown following its implementation, despite the Government implementing a number of initiatives to improve business conduciveness.
The study notes, however: “A consensus view is that India is poised for a sustainable growth in the near future.”
The report explains that after GST implementation, the removal of various inter-state check gates has smoothed inter-state movement of goods. The report also maintains that GST will have a significant impact on all aspects of businesses operating in the country, including supply chain, sourcing, and distribution decisions, inventory costs and cash flows, pricing policy, accounting and transactions management.
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By GlobalDataGST will also have an impact on prices agreed for contracts entered under the pre-GST regime.
It adds: “The introduction of GST should entail a reduction in overall process on account of reduced tax costs. The government is continuously focusing on improving the business environment in the country, but there is still significant scope to attract further investments.”
The report suggested Central and State Governments work in tandem by executing investor-friendly policies to further strengthen the country’s investment prospects. It states that factors such as robust domestic consumption, investor-friendly strategies, skilled manpower, transparency in Government procedures and responsive policy making, with an immediate focus on effective implementation of reforms, will continue to position India as a preferred investment destination.
According to the International Monetary Fund (IMF), India’s economy is expected to grow at 7.4% in 2018, up from an estimated 6.7% in 2017. Timely and smooth implementation of landmark reforms such as the GST are crucial if India is to realise its potential real GDP growth between 8% and 10%.
In terms of textile and apparel investment, the Government of Madhya Pradesh has announced plans to upgrade existing apparel clusters at Indore and Jabalpur and establish a textile park in Chhindwara. The central Government has also sanctioned US$6.6m to develop a second textile park at Indore.
And in July, the Maharashtra Government proposed to set up an integrated textile park in Malegaon on 345 hectares of land. It is planning to set up a garment park in Solapur, with an investment of $44.6m, to generate employment and to boost the textile sector.
