Union Budget 2023-24: Perspective on textile industry

02 February 2023, Mumbai

India gets its moment in the sun!

The domestic yarn and fabric producers, cotton, wool, synthetic fiber suppliers, dyers, printers, finishers, machinery, and textile chemical industries, and our American garment industry clients make up the domestic textile industry.

India is one of the world's top nations that contributes considerably to the global textile industry. India is the biggest exporter of cotton and the world's most extensive fiber producer away from China. Through the years Its garment and textile (T&C) exports have consistently increased.

Union Budget simplified for readers

Takeaways

Context setting; Union budget 2023 theme; Green Growth re-emphasizing its commitment to Budget 2023 to give impetus to green growth underlying the theme of business models to factor in the social cost of carbon from now on with the emergence of carbon taxes/carbon policy intervention in some advanced nations on the background thus, throwing economic opportunities for the businesses. 

A budget that has laid the foundation for sustained growth in the coming years and, balances growth with fiscal prudence. This one is all about the 3Cs CAPEX, Consumption & Credit.

Indian textile industry has been the epitome of ''Resilience To Resurgence" all thanks to better handling of the pandemic by Indian authorities.

Union Budget 2023, which is the last full budget before the general elections were presented by Finance Minister Nirmala Sitharaman, and focuses on increasing the production and export of textiles in India. 

In her Budget speech, Nirmala Sitharaman alluded unequivocally that," Interestingly one of biggest revelation was an extraordinary sized technical textiles imports to the extent of around USD 16 billion per annum is highly disturbing given that, India is a textile magnate and already is well aligned to the (GSCs) global supply chains endowed with plentiful of raw materials besides, having a reasonably good textile manufacturing heft, robust domestic market available consumption and required knowhow.

Path-breaking interventions; The budget proposes to set up a comprehensive national program for handloom and handicrafts, including a scheme for their development and promotion. Additionally, a National Technical Textiles Mission will be launched to promote technical textiles in areas such as agriculture, construction, and healthcare.

Budget thrust; In order to encourage the growth of textile industries in the country, the government has allocated a significant amount of funds for the development of the sector as this sector has to make not only for this country but for the rest of the world and, thus needs to make it competitive.

The allocation of Rs. 3,380 crores which indeed is not a conservative estimate for the integrated scheme for the development of the silk industry, Rs. 2,500 crores for the scheme for the promotion of production and export of handicrafts, and Rs. 1,480 crores for the scheme for the development of handlooms will aid the growth of the sector.

Furthermore, the most compelling part is that the budget also proposes the setting up of an Rs. 10,000 crore fund to support the MSME sector in the textile industry, which is a significant contributor to the country's economy. The fund will provide easy and low-cost access to credit for the MSMEs in the textile sector and the numbers look good.

Industry view

Sanjay Vakharia, CEO of Spykar Lifestyle shares his insights on “The Union Budget 2023-24, his statement expresses a positive view on the recent budget proposal, welcoming the focus on growth, economic progress, modernization, and sustainability.

He is of the firm belief that the rise in spending on capital expenditures will drive sustainable growth, the government's efforts to improve cotton productivity will stabilize cotton prices, and the decrease in personal income tax broadly will spur disposable income and fuel consumer spending. Despite the present muted demand due to inflationary trends/economic pressures, Sanjay Vakharia maintains that this budget will help address these challenges.

Thrust on cotton crop productivity

“The government will focus on enhancing cotton crop productivity by adopting a cluster-based approach with a public-private partnership model and enhanced use of advanced technologies”, said Finance Minister Nirmala Sitharaman said in her Budget speech. The emphasis to increase cotton crop productivity was positive for cotton textile stocks.

Apparel sector perspective

The industry is seeing rough times due to costlier raw materials and global economic challenges. Costlier cotton is the key pain point for the Indian garment industry. On the one hand, the cost of production of garments has increased.

Also, cheaper garments are being imported into India from China, Bangladesh, and other countries. Since higher cotton prices are the main cause of concern for the entire textile industry, removing the import duty is expected to ease cotton prices.

Higher cotton prices increase garment production costs, so exporters are not in a position to offer competitive prices. Cotton imports under Advance Licence offer duty-free raw materials for exporters but they are not entitled to incentives under RoDTEP.

The industry wants GST rates for ready-to-wear items to be reduced from the current 12.5 percent to 5 percent since high GST rates discourage consumers from buying. Also, taxation on Employees Stock Options (ESOP) should be based on actual gains, not hypothetical benefits.

Since India’s garment export industry, more particularly micro, small, and medium units, have been affected badly due to the international market situation caused by the Russian-Ukraine war, a moratorium of a minimum of six months for the existing loan payments has been suggested. Special funding has been called for to develop labor-supportive infrastructure in clusters where labor-intensive industries like clothing/apparel/garments are concentrated.

The globe comes to India

Dialing now into a nation the globe wants to listen to Considering that Opportunity Knocks on the Indian Doorstep; With China Plus one, in turn, will contribute to the overall growth of the Indian economy 'Winners & Losers' India's rise "Beyond'+1" is credible; as India becomes a serious player in the global textile economy.

The sector gets a shot of hope amid the gloom

The Union Budget 2023 captures the spirit of employment generation and has several provisions to promote the textile sector's growth in India. The allocation of funds and the launch of new schemes will create a positive impact on the industry, increase production, and boost exports. At the bourses, the textile stocks rallied up to three percent in the morning.

Work in progress

Different strokes for different folks

Crafting a budget quite certainly is a science and art giving a push to inclusive growth and is likely to give a thrust to the textile sector as this sector always has a multiplier impact on employment generation.

In short, it is a bottoms-up budget where the development has been taken down to the grass root level.

Clearly stresses the need to invest in infra infra infra. In conclusion, the budget is anchored in development as well as growth taking a holistic view of the green/clean energy transition on its journey to the nation's sustainable development model and on the whole, well delivered as job creation is the middle name of today's budget and the government is not done yet.

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