INDIAN TEXTILE SECTOR ON A RECOVERY PATH – CITI
New Delhi, Friday, June 29, 2018: Mr. Sanjay Jain, Chairman, CITI stated that the sector which saw a major hit due to demonetization, implementation of GST, rupee appreciation and high domestic cotton prices, is finally showing some signs of recovery. As per RBI Financial Stability Report- June 2018, the stressed advance ratio of textile sub-sector has improved in March 2018 from the levels of September 2017 as indicated in the figure below:
While as per the report by RBI, textile sector has reported a high transmission of stress to the banking sector. Recovery is expected owing to rupee depreciation, picking up of domestic demand and progressive policies of the Government. Mr. Jain also expressed his gratitude to the Government for its strong support to the textile sector. All the support extended by the Government, including Rs.1,300 crore Samarth scheme for skilling, Rs 6000 crore package for Apparel & Made-ups along with various State Incentives, is expected to create a strong turnaround in Textiles & Clothing Sector and put the industry back on growth path. The Government has also been very receptive in resolving many GST issues, though there are still a number of issues which industry is hopeful will get resolved very soon.
Mr. Jain pointed out that the only urgently required and missing piece in the success jig saw puzzle is Government Policy support for stopping excess imports and refund of all duties and taxes on exports across the value chain. In the financial year 2018, the imports of textiles and apparel has touched US$ 7 bn, which is 16% higher than the last year value of US$ 6 bn. All the categories across the value chain have seen a drastic rise in imports as indicated in the table below
Table: India’s Imports of Textile and Apparel
Data Source: CITI Analysis based on DGCI&S data
Moreover, Mr. Jain cited that the embedded duties, which are in the range of 4 to 6% across the value chain are not getting refunded. This is one of the key factors for decline in exports apart from blockage of funds due to delay in GST refunds and rupee appreciation.
Mr. Sanjay Jain highlighted that the biggest game changer that could transform the industry and put it at par with its competitors such as Vietnam and Bangladesh is Free Trade Agreement (FTA) with EU, Australia, Canada and Britain for Made-ups and Garments & reduction of import duty on Indian cotton yarn and fabric by China.
Mr. Sanjay Jain stated that he is very optimistic that Government would intervene in the matter and continue to support the textile industry. It is one of the unique industries, well being of which directly impacts farmers and the labour workforce (particularly women) in a very big way across the breadth of the country.
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(Dr. S. Sunanda)
CONFEDERATION OF INDIAN TEXTILE INDUSTRY (CITI)
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