Signs of sunrise

Handloom fabrics on display at the Fabindia showroom in Hyderabad. The handloom sector accounts for a quarter of the country's total textiles exports. - ARUNANGSU ROY CHOWDHURY

Fresh incentives and a series of policy initiatives from the Ministry of Textiles have brightened the growth prospects of the textile industry.

THE textile industry plays an important role in the economy of the country. It accounts for about 14 per cent of the industrial production, 4 per cent of the gross domestic product (GDP) and 16 per cent of the country's export earnings.

The industry is extremely varied, with the hand-spun and hand-woven textile sector at one end of the spectrum and the capital-intensive, sophisticated mill sector at the other. In the middle are the decentralised powerloom and hosiery and knitting sectors, which form the largest segment of the industry.

The close linkage of the industry with agriculture and the ancient culture and traditions of the country also makes it unique when compared to the textile industries of other countries. It has the capacity to produce products for different market segments, within and outside the country.

Further, it has great social relevance as it provides direct employment to 35 million people, including a substantial number of women and Scheduled Castes and Tribes. After agriculture, it is the second largest provider of jobs in the country. Thus, the all-round development of the industry has a direct, positive bearing on the nation's economy.

It may sound clichd but the truth is that the Indian textiles industry is now at a crossroads. In spite of the abolition of export quotas in January 1, 200, and the various incentives offered by the Union government, it has not been able to make headway to the extent anticipated.

Studies undertaken during the run-up to the removal of the quota regime had suggested that India and China would be the major beneficiaries of quota elimination. But China, with a share of about one-sixth of the total world exports of textiles and clothing, has performed far better than India. For instance, trade data from the United States shows that India's exports to that country grew by only 25.17 per cent from January to September last year, as against the whopping growth rate of exports of 58.60 per cent for the same period.

The outlook, however, appears bright, given the fresh set of incentives that have been offered in the General Budget for 2006-07. A highlight of the package is a reduction in the excise duty on manmade fibre and filament yarn from 16 per cent to 8 per cent and import duty from 15 per cent to 10 per cent. This should give a major boost to the synthetic segment, which has a high global demand, but India's output, both in terms of fibres and fabrics, leaves much to be desired.

The package is also noteworthy for the increased assistance it offers for technology upgradation. The allocation for the Technology Upgradation Fund Scheme (TUFS) has gone up from Rs.435 crores last year to Rs. 535 crores this year. The Scheme has also been extended to the handloom sector.

Launched in 1999, TUFS already covers spinning, cotton ginning and pressing, silk reeling and twisting, wool scouring and combing, texturising, crimping and twisting of synthetic filament yarn, manufacture of viscose filament yarn, viscose staple fibre, weaving/ knitting including non-wovens and technical textiles, garments, processing of fibres, yarns, fabrics, garments and made-ups and the jute sector.

TUFS, which is the flagship scheme of the Union Ministry of Textiles, aims at making funds available to the industry for updating the technology of existing units and to ensure that new units are set up with state-of-the-art technologies. It was originally launched for a period of five years and has since been extended till March 31, 2007.

The package also provides for an allocation of Rs.189 crores for the Scheme for Integrated Textiles Park, which was formulated recently by merging the Scheme for Apparel Parks for Exports and the Textile Centre Infrastructure Development Scheme in a bid to have a more focussed approach to the process of setting up world-class infrastructure for textile units.

The scheme, which welcomes public-private partnership, targets industrial clusters and locations with high growth potential. It envisages engaging a professional agency for project execution. So far, nine projects have been sanctioned under the scheme - at Cuddalore, Perundurai and Palladam in Tamil Nadu, the Surat and Mundra Special Economic Zones in Gujarat, Kohlapur, Ichalkaranji and Thane in Maharashtra and Kishangarh in Rajasthan.

In addition, Budget 2006-07 provides for the launch of a jute technology mission and the establishment of a jute board to "harness the potential of the golden fibre". The mission would aim to improve the quality and yield of jute fibre, strengthen the infrastructure for development and supply of quality seeds, and develop and commercialise innovative technology for diversified use of jute and allied fibres.

The initiative in the jute sector is timely, considering that even though jute was increasingly becoming a favoured material the world over because of its eco-friendly and bio-degradable characteristics, the performance of the sector has not been satisfactory. The main hurdles had been instability in the production of raw jute and obsolescence of machinery.

The Budget package for the textile industry also includes a programme for setting up yarn depots in different parts of the country to ensure uninterrupted supply of yarn to weavers, and introduction of a `handloom mark' on the lines of `wool mark' to promote quality. Finance Minister P. Chidambaram also announced that the cluster development approach for the handloom sector would be continued and that 100 additional clusters would be set up at a cost of Rs.50 crores. The handloom sector accounts for a quarter of the country's total textiles exports.

Apart from the announcements made in the Budget, the Ministry of Textiles has also been taking a series of initiatives to pave the way for the growth of the textile industry. Among other things, it has prepared a road map for the modernisation of 22 mills under the National Textiles Corporation (NTC), largely with the help of resources generated from the sale of surplus land of unviable NTC mills in Mumbai; 30 other mills will be modernised in collaboration with private partners.

More steps are on the anvil. These include a move to grant the status of `centre of excellence' to the National Institute of Fashion Technology. This would enable the institute to confer degrees in place of diplomas on its students. It is expected to give a major boost to value addition in the readymade garment sector, which accounts for about 45 per cent of the country's total textile exports. A legislative Bill to upgrade the institute has already been approved by a Parliamentary Standing Committee and it now remains to be cleared by Parliament.

The National Textile Policy, announced in 2000, had set an export target of $50 billion by 2010. It may seem to be a tall order. It is not so. The figure was arrived at following detailed discussions with all the stakeholders and also a perspective analysis by an expert committee group of the various issues and problems facing the industry. In other words, there is a large potential, which still remains to be tapped.

The Economic Survey presented to Parliament on the eve of the Budget in February has identified several bottlenecks that are hampering the growth of the industry. It has drawn particular attention to the absence of labour market flexibility and an effective exit policy, apart from infrastructure and administrative bottlenecks, including delays at the customs. It has recommended that more measures be taken to facilitate inflow of foreign direct investment into the industry from major textile importers such as the United States and the European Union and for greater use of modern tools of information technology in the industry.

The Survey notes: "A number of steps were taken to prepare the T&C (textile and clothing) sector in India for the post-quota period. But, the opportunities unleashed have not materialised in full because of reservation of certain items for small scale sector until recently, absence of labour market flexibility and an effective exit policy, which has prevented development of scale economies, longer lead time and infrastructural and administrative bottlenecks, including delays at customs.

"Greater FDI in the T&C sector from major textile importers like the E.U. and U.S. can catalyse the sector. There is also need to increase productivity, to apply the prowess gained in the new economy sectors like IT to this old economy sector and to redress the problem of lacklustre growth in the synthetic segment, where world demand is high. But India's output of fibres and fabrics have fallen in the current year".