Union Budget 2017 to help textile industry achieve $350 bn target

The textile industry though did not see any major announcement in the Budget but higher fund allocation for labour skilling and end-to-end logistics solutions, including rail and coastal shipping last-mile connectivity, will help the country’s textile industry to achieve the $350-billion target in next few years as set by the union government.

However, continuing with the existing tax structure, including the service tax and optional Cenvat route extended for textile industry till the GST is implemented, has been considered as a big boost for the sector.

The cluster approach for contract farming would greatly benefit the predominantly cotton based textile industry in India, where more than 80% of MSMEs are located across the country.

The government’s proposal to allocate funds for affordable housing scheme (as sought by the textile sector) is a boon to the sector.

The overall allocation for the textile sector has remained flat, there has been an increase in allocation towards remission of state levies to R1,555 crore for 2017-18 from R400 crore for 2016-17, which is likely to result in 1-1.5% cost savings for a section of exporters.

According to Raja M Shanmugham, president of Tirupur Exporters’ Association (TEA), enhancement of allocation of fund to Mudra Bank from R1,36,000 crore to R2,44,000 crore which will encourage the new entrepreneurs in the region to invest in sectors such as knitwear.

The announcement on allocation of fund for affordable housing scheme is quite encouraging which has been requested by the association since there has been a plan to construct one lakh houses for labourers.

Similarly, the like change in labour reforms, which has been pending for sometime, would also help clusters such as Tirupur where they have lakhs of workers working for day and nights.

A sum of R2,200 crore to upgrade labour skilling is also a major measure for labour intensive industry like textiles.

Moreover, the allocation to textile sector remains relatively unchanged — R6,230 crore in 2017-18 from R6,290 crore in 2016-17. However, the lesser allocation for both Amended Technology Upgradation Fund Scheme (ATUFS) and cotton procurement is offset by higher allocation for the textile package announced on June 22, 2016.

Reduction in tax rate will improve bottom line of companies in textile sector as there are significant proportion in the SME segment,