An industry group is calling on the Indian government to take a number of steps to revive the country's textile and garment sector, including more flexible labour laws, financial incentives, and subsidised power supplies.

"The government needs to maximise policy support to ensure India retains its competitiveness in the textile and garments sector," said Mr Sajjan Jindal, president of the Associated Chambers of Commerce and Industry of India (Assocham).

He notes that India's Asian counterparts including China and Pakistan are offering fiscal and monetary assistance to the sector (China recently increased export tax rebates for textile firms) - and wants the Indian government to do the same.

The trade body warns that textile exporters have been hit by a surge in cotton prices, long power cuts, high levels of credit, and a slowdown in orders from their largest customer, the US.

Assocham believes textile and garment firms should re-focus their exports from the US and Europe to regions of the Middle East and Africa, which currently account for just 9% and 12.5% of textile exports respectively.

"Huge potential lies ahead for strategic expansion of the export market, but unstable economic conditions at the short term period in African regions calls for special fiscal and monetary incentives for the new venture for a specified time period," it says.

The growth in India's fabric production has slowed from 4% in 2006-07 (April-March) to 1% in the same period of fiscal 2008, and textile mills are likely to cut production by 20-25%.

And almost 1.5m workers across the sector have lost their jobs since last year, the group says.

India's Eleventh Five Year Plan targets 22% growth in textile exports - but in fact this has fallen from 16.6% in 2005-06 to 13.5% in 2007-08.

Assocham believes the government should draft a new 5-year target and work jointly with industry and labour unions to develop the industry and its work force.

This could include vocational training institutes in the rural and suburban areas to develop skills in textile design, weaving and spinning.

Textile companies have also been forced to postpone their expansion and modernisation plans, which is making India's textile sector uncompetitive compared to Vietnam, Bangladesh and Cambodia.

This is partly because of the high cost of credit, but also due to the withdrawal of export incentives (the interest subvention scheme) by the Reserve Bank of India on 1 August 2008 in a measure to check inflation.

Assocham would like to see the interest subvention scheme - which gives exporters bank credit at a reduced rate - continued until March 2010.