BUDGET EXPECTATIONS: TEXTILE SECTOR

17 Jan 2023 , 01:01 PM

The Indian textile industry had witnessed a roller-coaster year, with a huge demand upswing in FY2022 to a sharp increase in raw material prices (cotton) in H1 FY2023. The slowdown in developed economies has cast a shadow on the textile export market. Green shoots of recovery can be seen in the recent trade agreements signed/initiated. The FTA with Australia should open a lucrative export market for garments, and the proposed trade agreement with the UK should level the playing field with another large textile exporting neighbour. The China+1 sourcing policy being endorsed by several large consuming regions across the globe to reduce the risk of events such as the pandemic, and increasing concerns on the use of Xinjiang cotton, are fuelling this opportunity. China leads the global textile market at present and is likely to shed some share in the near to medium term, making India one of the potential beneficiaries of this shift.

ICRA expects the Government to maintain its focus on incentivising investments across the textile value chain to achieve its aspirational target of a 3x growth in India’s textile exports to USD 100 billion in five years. Greater emphasis is likely on the MMF value chain, apparels and technical textile segments, which offer immense growth opportunities in global trade, and where India has been lagging so far. In line with the thrust on Make in India, the Government has taken several policy initiatives, such as flagging off the PLI scheme, extension of the Rebate of State and Central Taxes and Levies (RoSCTL) scheme for apparels and made-ups for three years, announcement of the Remission of Duties and Taxes on Exported Products (RoDTEP) rates for other textile segments and notification of seven textiles parks under the PM-MITRA scheme. While the policy initiatives are all steps in the right direction, effective implementation remains crucial, for which adequate provisioning in the Budget is necessary.