Budget 2013: What the textile sector seeks

The textile sector is one of India's oldest industries ranking next to only the agricultural sector.

Textile industry not only provides employment to a large section of skilled and semi skilled workforcebut also contributes over 15 per cent to the nation's industrial output.

Testimony to the fact that India's textile sector holds a formidable presence is its overall contribution totaling to almost one third ofthe country's gross export earnings.

Having a wide range of spectrum from yarns and fibres to handlooms to ready to wear garments and exports, the sector is directly correlated to a number of budgetdecisions and proposals.

The past financial year has been a mixed bag for the Indian textileindustry as a whole.

The industry is looking at the Financial Budget 2013 to kick start a period of sustained growth and development.

India's textile exports declined 5.9 per cent year-on-year to $14.1billion during the April-September 2012 because of slowdown in major international markets.

With China's textile sector coming under stress, Indian markets have witnessed a good third quarter with expectations of a bullish phase in the final quarter.

Reduction of Duty on manmade fibres has been a long awaited decision that islikely to kick start Indian textile growth story.

The industry observers including Confederation of Indian Textiles Industry have already forwarded their appeal to the finance ministry.

Industry expects a reduction of duty on man-made fibres and allied raw materials to somewhere around 8 per cent from the existing 12 per cent.

Increasing production cost in China has given a window of opportunity for theIndian textile sector in the man made fibre segment.

The industry ishopeful that reduced excise duty can help increase the quantum ofproduction to compensate for the likely revenue loss for thegovernment.

Textile giants, small time manufacturers and MSME’s have also put theirweight behind the CITI’s proposal as it helps them compete withChina in a more transparent manner.

Currently import duty on importedyarn floats between 5 to 16.9%

compared to other nations resulting inhigher costs and lower sale figures.

Anti-dumping rules have been a major decision maker impacting the Textile industry in the last decade.

Although the government in previous budgets have stressed on anti dumping duties to protect the interest of the small time manufacturers and SMEs, bigger industrialists have been blamedfor tweaking the laws in their favor.

Small industrial houses expect the government to bail them out by lowering the anti dumping duty slightly so that even the smaller players can get the benefits usually enjoyed by bigger corporations.

How far would the government go in tweaking the existing anti dumping duty remains to be seen but chances are very high that we may well see a more level playing field in this year’s budget.

An increase in the customs duty on filament yarn from the existing 5% to10% is expected in this year’s budget.

This is aimed at strengthening the domestic polyester fibre and filament yarn segment.

The industry has showed signs of a positive impact if such a hike is actually considered by the government.

It is likely to trigger moredomestic investor interest in the Polyester segment enabling cheaper availability of yarn.

The industry is also hopeful for an increase of abatement on branded garments for excise duty in this year’s budget.

The increase for apparel products in the ready to wear market from the existing 70% can be hiked nearly 15% to touch the 85% mark.

With the high inflation figures and slowing down of the consumer expenditure index, such a move is likely to benefit both the end retailers as well as inject a level of optimism in the domestic apparel and garment section.

This will also help in rebuilding consumer sentiment as wellas sustain growth in the branded apparel segment.

Railway Budget, as it unfolded on February 26

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