Indian Textile Industry

Indian Textile Industry

Global Crisis & it’s Impact 1

AGENDA • • • • • • • • •

Introduction Glorious past Present scenario Slowdown in Growth Slowdown in Exports Slowdown in Investment Declining Profitability Employment Recommendations

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INTRODUCTION • Second largest employer in India after agriculture in today’s scenario. • The Indian textile industry is estimated at $52 billion. • In the XI Five Year Plan, textile industry was expected to grow at 16% per annum and attain a size of $115bn by 2012. 3

GLORIOUS PAST • Known as world’s textile hub from the premaurya civilisation. • Transit for the golden silk route. • British colonial rule help to establish eastern Manchester in Ahmedabad and part of Bombay presidency. • Post independence boom- due to favoured quota import policy by developed nation. 4

PRESENT SCENARIO • Global manufacturing backyard • Supply to all textile and retail majors like Dolce and Gabbana, Gap, Mark & Spencer, Zara and Harrod’s. • Global VC major like Blackstone picking up shares in Gokaldas exports and Himatsingasiede. • Knit ware hub at Ludhiana and Tirupur and dedicated textile SEZ by Adidas in Nellore, AP. • Indian majors Spentex, GHCL and Welspun making buy-out the iconic brand like Roseby. 5

SLOWDOWN IN GROWTH • The growth rate in the textile industry became 0.8 % in 2008-09 (April-August). • The growth rate of Wool, Silk & Man-Made Textiles sector became negative (-1.2%) in the first five month in the year (April-Aug). • The jute textile segment also declined in 2008-09 by 7.4% as compared to the 33% growth in 200708. • Textile products picked up slightly (5.8%) in 6 2008-09 as compared to 3% in 2007-08.

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SLOWDOWN IN EXPORTS • Indian textile export increased to $19 billion. • In April- May 2008-09, the textile exports were $3.4 billion, compared to $2.8 billion in AprilMay 2007-08. • U. S. Clothing & clothing accessories sales have plunged in September 2008 vis-à-vis August 2008 by 2.3%. • The share of both Textiles as well as Readymade Garments (RMGs) in total exports 8 of India has been falling since 2006-07.

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SLOWDOWN IN INVESTMENT • In April-July 2008-09, the amount of investment has become one third compared to the level in April-July 2007-08. • In the year 2007-08, only 470 applications were received for the capital subsidy scheme for Powerloom Units as compared to 863 applications received in 2006-07. • The amount of FDI in the textile sector has increased slightly to only $37.9m FDI in the textile sector in 2008-09 (April- July). 10

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Declining Profitability • Profitability of textile sector has been falling since June 2007. • The profitability declined by 99% in quarter ending June 2008. • According to CMIE sources the profitability plunges @45% in June 2007 to @99% in June 2008. 13

Slowdown & Impact on Employment • As on March 31st 2007 textile sector provided employment to 35 million people directly. • Provides indirect employment to another 88 million people in the country. • To provide employment to an additional 10 million people in the 11th five year plan. • Current global financial crisis leads to blanket job cut of 5 million specially in artificial textile & weaving sector(Source: Economic Times). 14

Recommendations • • • • • • •

Increase duty drawback rates Moratorium on Term Loans Interest Subvention Extension of Sunset Clause Custom and Excise Duty on Synthetics Technology Up-gradation Fund Scheme Exemption from Service Tax 15

Recommendations(contd…) • Excise Duty on Textile Machinery &

Spares to be reduced • Reduction of Custom Duty on Textile Machinery • Exemption route to be extended to Export Oriented Units (EOUs) 16

Recommendations(cont.) • Fringe Benefit Tax under Sec 115 of the Income Tax Act • Refund of State Taxes & Duties to Exporters • Uniform rate of VAT on Industrial Inputs • Reduction of Excise Duty on Man–Made fibre Products 17

THANK YOU

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