New textile policy to reap Chinese slowdown benefits

The government is likely to announce a new textile policy by April, aimed at helping the sector take advantage of the slowing competition from China through a series of reforms.

Announcing this development, Santosh Kumar Gangwar, the minister of state for textiles (independent charge), said on Thursday, the new textile policy would be announced in the Budget session of Parliament.

“The slowdown in the Chinese economy has rendered the cost of textile production in China high. So, Chinese textiles manufacturers have the lost competitive advantages of lower cost of production in the last few months. This has offered an opportunity for Indian players to grab the market share of China in the developed world, especially the European Union and the United States, which cumulatively comprise around 60 per cent of the global export market. This is the right time to increase our market share in exports,” said Gangwar.

With the low cost advantages, China has increased its market share in the global textiles trade to 35-40 per cent, while India inched up to five per cent from three per cent over the last decade or so.

To begin with, there would be amendments to the labour law, under the new policy, allowing women to work at night.

According to existing norms, women are allowed to work only in the day shifts. However, about 50 per cent of the workforce in the sector comprises rural women, and it is essential to allow them to work at night.

“The textiles ministry has taken this issue to the highest level of the government to resolve the impediment and amend the existing labour law to accommodate the change,” said Rashmi Verma, secretary, Ministry of Textiles.

The textile ministry also wrote to the finance ministry to lower interest rates to seven per cent on working capital. A sudden spurt in interest rates has resulted in many manufacturing units closing down, and others facing a huge squeeze in their profit margins.

The textile sector employs 35 million people and aims to double the number by 2022. The government is focusing on training youths in different skills to meet this target.

Speaking on the occasion, B K Goenka, chairman, Welspun Group, said, “India’s textile industry is estimated at $110 billion, of which domestic markets contribute about $70 billion and the rest is from exports.”

The government is also looking into special incentives for manufacturing units to be set up in the Northeast, Bihar, Jharkhand and West Bengal, where the cost of production would work out to be lower than in Maharashtra and Gujarat, where most of the factories are located.

“Labour is very cheap in these states. So, the pressure of high cost of production would certainly ease to certain extent,” said Verma.

The government is also working on free trade agreement with the European Union. “The government will also facilitate exports schemes to promote textiles exports,” said Verma.

Speaking on the occasion, Naishadh Parikh, Director, Arvind Ltd, urged the government to convert exports incentives into manufacturing incentives manufacturing and exports of textiles from India would be unviable after 2017 once World Trade Organisation  (WTO) guidelines come into place.

"India is a signatory of the WTO and therefore, has signed the agreement under which all exports incentives would be automatically withdrawn post 2017. Once exports incentives would be converted into manufacturing incentives, we would enjoy benefits without having violation of WTO guidelines," said Parikh.

Textiles manufacturers in India currently enjoy various exports incentives schemes including MEIS and duty drawbacks.