Recently, a high-level expert panel, established by the Commerce Ministry, gave out certain recommendations aimed at revitalizing the textile sector. Some of the significant suggestions include: revisiting free-trade agreements with nations such as Bangladesh that currently enjoy zero-duty access to the Indian market; amending archaic labour laws; and accelerating the disbursal of subsidies for technology enhancement.
Exploring the Textile Sector
The textile and garment industry in India is a vast one, which can be subdivided into two notable segments – yarn & fibre, and processed fabrics & apparel. This sector provides employment to approximately 45 million people in India, rendering it second only to the agriculture sector in terms of job creation.
India’s textile sector, one of the oldest industries in the country’s economy, serves not just as a livelihood provider but also as a repository and conveyor of traditional skills, cultural heritage, and customs.
This vast industry is further categorized into two subsets – the organized sector, which employs modern machinery and techniques, encompassing spinning, apparel and garment segment, and the unorganized sector, wherein traditional tools and methods are employed incorporating handloom, handicrafts, and sericulture work.
According to the India brand and Equity Foundation (IBEF), India is considered among the world’s largest producers of textiles and garments. The domestic textile and apparel industry contributes 2% to India’s GDP and accounts for 14% of industrial production, 27% of the country’s foreign exchange inflows and 13% of the nation’s export earnings.
| Contributions | |
|---|---|
| GDP | 2% |
| Industrial Production | 14% |
| Foreign Exchange Inflows | 27% |
| Export Earnings | 13% |
Challenges in the Textile Sector
The textile sector is facing numerous difficulties. One such issue is the outdated labour laws, especially the law that instructs any company employing 100 or more workers to take permission from the Labour Department with jurisdiction over the firm before executing any layoffs or retrenchment.
Free-trade agreements such as the South Asia Free Trade Agreement (SAFTA) have led to fierce competition from countries like Bangladesh, which have zero-duty access to the Indian market. This has given rise to calls for the government to reassess these pacts and seek a resolution.
Moreover, the sector has felt the impact of recent reforms such as stagnating exports, demonetisation, bank restructuring, and the implementation of the Goods and Services Tax. India, which was once the second-largest exporter of textiles & clothing between 2014 and 2017 after China, has slipped to the fifth spot, losing its position to Germany, Bangladesh, and Vietnam.
Issues with Subsidy Disbursal
Another problem plaguing the textile sector is the delayed disbursal of subsidies for technology upgrades under the Technology Up-gradation Fund Scheme (TUFS). This scheme is a credit linked capital investment subsidy under TUFS, providing a reimbursement of 5% out of interest charged by lending agencies for facilitating investment in modernizing textiles and jute industries. However, the scheme is not being effectively implemented, leading to a delay in industry modernization.
Understanding SAFTA
The South Asian Free Trade Area (SAFTA) is the free trade arrangement of the South Asian Association for Regional Cooperation (SAARC). The agreement, which came into force in 2006, supersedes the 1993 SAARC Preferential Trading Arrangement. SAFTA signatory countries include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. It identifies the requirement for special and differential treatment for Less Developed Countries (LDCs) in its preamble.
