Budget 2018: Boost for textiles exports with Rs 71.48-bn special package

Overall apparel exports had been consistently declining due to GST impact and discontinuance of export sops, ergo the reason to revisit the sector in Budget 2018

Textiles exports from India are likely to get a boost with the increase in the special package for the financial year 2018-19.

Finance Minister Arun Jaitley in the Union Budget 2018-19 raised special package by 19 per cent to Rs 71.48 billion for apparel sector to boost exports. In 2016, the government had announced a special package of Rs 60 billion for the same purpose.

Rahul Mehta, President of Clothing Manufacturers Association of India (CMAI) said that the increase in the outlay looks prima facie was positive but, it is yet to be seen how impactful the enhanced outlay would be for the entire apparel value chain, he added.

Ashok G Rajani, chairman, Apparel Export Promotion Council said it was an excellent announcement and would also increase women's employment and boost export growth. He added that when the last package was given India's exports grew at 12 to 14 per cent subsequently.

Kavita Gupta, Textile Commissioner, the Ministry of Textiles, Government of India had earlier stated that the textiles and clothing industry had promised  the government to bring an investment of Rs 800 billion along with creation of employment opportunities for 10 million people within three years. Already two years have passed but investment to the tunes of Rs 70 billion and employment of only 100,000 persons were achieved. “The Industry should try to fulfill its promise given to the government the Union Textile Ministry has announced the Rs 60 billion special apparel package in July 2017 and the garment and made ups Industry should take advantage of the scheme.

The domestic market growth rate of apparel industry was flat during 2017-18 due to demonetisation and GST. However, things are stabilising and the growth rate is anticipated to be between 10 and 12 per cent in the fiscal year 2018-19. On the export front, if the government does not increase duty drawback rates, there could be a possibility of negative growth in the export sector, said Mehta.

K Selvaraju, Secretary General, The Southern India Mills' Association  welcomed the allocation to boost apparel and made-ups exports, 12 per cent employers' provident for the first three years, and extension of fixed term employment for all segments (earlier only for apparel and made-ups).  

Indian apparel industry saw consecutively declining numbers for overall exports in October, November and December 2017 – a fall of 39 per cent, 11 per cent and 8 per cent year-on-year, respectively – thanks to the impact of the Goods and Services Tax (GST), rolled out in July, and the discontinuance of certain export incentives. As a result, from seeking restoration of export incentives at the pre-GST rates (7.5 per cent duty drawback on cotton apparel and 3.5 per cent return of state levies or ROSL) to exemption of the 18 per cent taxes levied towards air freight charges under GST, Industry body Apparel Export Promotion Council (AEPC) has made around 8-10 demands.

"We have been asking the government to support the apparel exporters to survive. There have been blockages of funds as very few people got GST refunds between July and December. The dollar, which was worth Rs 65, came down to Rs 63, hurting exporters further. We have become uncompetitive and Bangladesh has started cashing in on this by offering its products 10-15 per cent cheaper in the global market,” said H K L Magu, chairman of AEPC.

From earlier rates of 7.5 per cent duty drawback and 3.5 per cent ROSL on cotton apparel, and 9.8 per cent and 3.5 per cent on man-made apparel, the apparel-exporting industry has seen these falling to 2 per cent duty drawback and 1.5 per cent ROSL on cotton apparel, and 2.5 per cent and 1.5 per cent on man-made apparel since the rollout of GST.