Govt likely to incentivise textiles in Budget as crisis hits B'desh exports

India aims to boost its textile and garments industry in next month's budget with financial support, tariff cuts on key inputs and incentives to produce locally, two government sources said.

An ongoing political crisis in neighbouring Bangladesh has prompted global retailers to explore alternatives, including India, for garment imports, exporters told Reuters.  "Indian exporters are finding it difficult to meet the rush of export orders in last few months as many US companies are looking for alternative suppliers," said Mithileshwar Thakur, secretary general at India's Apparel Export Promotion Council.

India's textile sector employs an estimated 45 million people and the government is considering increasing the textile ministry's budget allocation for 2025/26 by 10 per cent-15 per cent, from the current Rs 4,417 crore ($511 million), said a government source privy to discussions.

The government may also raise the allocation for production-linked incentives for the textile sector to around Rs 60 crore from Rs 45 crore for the current fiscal year, the source said.

Under this scheme, the government offers tax incentives and other concessions to companies choosing to manufacture locally.

Tariff cuts on raw materials such as polyester and viscose staple fibre, along with textile machinery, are also under consideration, a second government source said.

Import tariffs are currently in the range of 11 per cent-27 per cent on fibre, compared to almost nil duties in Bangladesh, impacting Indian garment exporters.

The sources requested anonymity as they are not authorised to speak to the media about discussions on India's annual budget, which is due to be announced on Feb. 1.

India's finance, commerce, and textile ministries did not respond to emails seeking comments.

BANGLADESH CRISIS

Bangladesh's garment exports to the US fell by 0.46 per cent to $6.7 billion between January and November last year, while India's exports rose 4.25 per cent to $4.4 billion, data from the US Office of Textiles and Apparel showed.

Shahidullah Azim, a Dhaka-based factory owner whose clients include North American and European retailers, told Reuters that some American buyers have shifted their orders to India and Vietnam, due to ongoing crisis in Bangladesh.

In the first eight months of the fiscal year through November, India's textile and garment exports rose by more than 7 per cent year-on-year to over $23 billion, compared to just 2 per cent growth in total goods exports.

Readymade garment exports grew by more than 11 per cent year-on-year, to near $10 billion during the same period, and are expected to cross $16 billion by March end, said Thakur at India's Apparel Export Promotion Council.