Budget Analysis! From the perspective of entire value chain of textile and fashion industry

by Dheeraj Tagra

09-July-2019  |  13 mins read

Budget Analysis

In what is the second article in the series, analysing the FY 2019-20 budget from the perspective of entire value chain of fashion and textile industry, Apparel Resources approached head of various associations, e-commerce giants like Flipkart, top brands like Woodland and apparel manufacturers. While some of them were happy with certain specific steps/announcements made in the budget, some others were disappointed.

Kalyan Krishnamurthy, CEO, Flipkart Group
Kalyan Krishnamurthy, CEO, Flipkart Group

Flipkart Group, the e-commerce giant, appreciated the budget and said that as the Government continues to push for Ease of Doing Business for MSMEs and industries,  Flipkart marketplace will be happy to continue connecting millions of MSME sellers, manufacturers and artisans with consumers efficiently and in a cost-effective manner. Kalyan Krishnamurthy, CEO, Flipkart Group is of the opinion that it is good to see the Government renew its commitment to boost ‘digital India’ in the budget. The Government’s vision on bridging the rural – urban divide with internet penetration will be pivotal in transforming India into a US $ 5 trillion economy.”  He also appreciated the impetus given to start-ups, MSMEs and FPOs (Farmer Producer Organisations) – which form the backbone of our economy – and also to electric vehicles. “Further, by setting up a National Research Foundation, addressing challenges faced by start-ups, and committing to transforming the education system, the budget is set to boost innovation in the country. Innovation will form the bedrock of the digital economy in India,” he added.

Rahul Mehta, President
Rahul Mehta, President, CMAI

Representing The Clothing Manufacturers Association of India (CMAI), Mumbai, the biggest association of Indian apparel industry (domestic), Rahul Mehta, President of association  sees budget as Mixed Bag. “There are two positive aspects in this budget: focus on agriculture and MSME sector. Both are directly related to the domestic apparel industry, be it manufacturing or retail. If agriculture gets some benefits and farmer’s income grows, apparel consumption will also increase as nowadays there is a good demand for apparels from smaller cities and villages too. Today 70 to 80 per cent industry constitute MSMEs and budget has some provisions for them.”

He further adds that overall budget has something for everyone like there are some big corporates in our industry, especially in retail, which are going to benefit with this increase in the annual turnover threshold limit from Rs. 250 crore to Rs. 400 crore with regard to 25 per cent corporate tax.

Rahul is concerned about the announcement made by the Government that it is going to relax sourcing norms for single-brand retail. “Yes, it may help to get more FDI (foreign direct investment) but at the same time, it is going to have a negative impact on Indian apparel manufacturers. We have to see how much leverage these brands are going to get as so far the picture is not clear. My only concern in this regard is that our industry should get some time, at least for about two years so that it can better prepare for this situation,” he added.

Woodland’s MD Harkirat Singh
Woodland’s MD Harkirat Singh

India’s leading brand Woodland’s MD Harkirat Singh is happy with the budget and he believes that keeping the growth of the nation in mind, the overall budget seems to be quiet positive. He appreciated the Government’s decision to provide 2 per cent interest subvention on fresh loans to MSMEs up to Rs. 1 crore and reduce 5 per cent tax for small and medium companies.

“Looking holistically, the budget is reformist and growth-oriented. The measures outlined in the budget for giving a boost to the infrastructure as a huge amount of Rs. 100 lakh crore investment for infrastructure over 5 years will boost the growth of the business. Also, to discourage the practice of making business payments in cash, the Government has proposed to levy TDS of 2 per cent on cash withdrawal exceeding Rs. 1 crore a year from a bank account. It will move India towards a ‘cashless society’ which will help facilitate retail trade as well,” says Singh.

Some of the export-oriented associations see this budget as a long-term effort and Navin Adwani, VP, Garment Exporters Association of Rajasthan (GEAR), Jaipur strongly believes that the best part of the budget is that this is for the long-term and focuses on infrastructure in a good way. “Long back, China did the same thing and gained. But I must say that the budget is missing short-term motivation or push to increase consumer sentiments and industry as well. And this was very much required. Regarding investment, there is something which is like open-ended discussion but the benchmark has not been created…”

He further added that this is probably the first time that the textile and apparel industry did not get anything in the budget. “Till now, we were used to getting something especially as seen in the few previous regimes but I will not say that there is something negative in this budget,” says Navin.

Kumar Rajagopalan, CEO, Retailers Association of India (RAI)
Kumar Rajagopalan, CEO, Retailers Association of India (RAI)

According to Kumar Rajagopalan, CEO, Retailers Association of India (RAI), Mumbai this budget is ‘pro-poor, pro-rural and pro-ease of doing business’. “With its focus firmly on accelerating country-wide development, the budget focused on a slew of measures for the rural sector, SMEs and start-ups. The measures for the rural sector including better infrastructure and road connectivity will boost consumption and make rural markets more accessible to modern retail,” says Rajagopalan.

The accordance of pension benefits to retail traders and shopkeepers with an annual turnover of less than Rs. 1.5 crore under the Pradhan Mantri Karam Yogi Maan Dhan Scheme is indeed a laudable move. This is the first time that a budget has recognised the retail trader and the role of small retailers in the country. The requirement to file quarterly returns for traders with an annual turnover of up to Rs. 5 crore, as well as the announcement of the Sabka Vishwas Legacy Dispute Resolution Scheme 2019 for the closure of pending matters in GST cases, are good moves that will give a breather to retailers.

“The decision to waive off MDR on payments made using digital tools for business establishments with an annual turnover of Rs. 50 crore is a good incentive for slightly larger retailers to move towards digital transactions,” he says.

Prabhu Dhamodharan, Convenor, ITF
Prabhu Dhamodharan, Convenor, ITF

Some associations like most specific points of the budget and they strongly believe that these steps will definitely benefit the textile industry too. One of them is Indian Texpreneurs Federation (ITF), Coimbatore, one of the major associations of the South Indian textile industry. Prabhu Dhamodharan, Convenor, ITF says, “We welcome the budget announcement regarding the formation of a committee with Government and private stakeholders to suggest action to move forward on women development. Increasing the participation of women in the workforce is the topmost priority of our country. Making a comparison, our total percentage of women in the workforce is around 26 per cent compared to Vietnam’s 73 per cent and China’s 62 per cent. The same is at 40 per cent for the textile and apparel industry. Our industry can be part of this mission and contribute more towards women development. We are keen to work on this mission at ITF. We also welcome the allocation of Rs. 350 crore for FY19-20 towards 2 per cent interest subvention scheme to benefit around 20 per cent of MSMEs registered under GST.

Among the appreciation by the trade bodies, some apparel manufacturers are not happy with the budget at all and main reason for the same is that they don’t see anything specific for them in the budget. CA Harsh Bang, Director, Luvh Attire, Kolkata is totally disappointed with the budget, not just as an apparel manufacturer but also as a common citizen. “Overall allocation has not increased much for textile industry; whatever announcements are made for MSME sectors, are not enough looking at the deteriorating condition of the industry. Irrespective of data, there is a cash crunch in the market, figures of big companies are also showing that they are not in profit. Retrenchments are happening in big organisations. From the last three years, overall businesses countrywide are down and there is no such announcement or step taken by the Government that brings cheer to the business community or even layman,” Says Bang.

Ashish Garg, Director, AG Fashion, Jaipur does echo almost similar voice and says, “If Government can’t give anything in budget, it should focus on long-pending issues like FTA. Recently Vietnam got its long-awaited FTA with EU, while we still don’t have any worthy progress in this regard. Now Vietnam has an edge of 9 per cent while Indian exporters are struggling to fit in buyer’s costing.”

Rajeev Bansal, Managing Director, Celestial Knits & Fabs, Noida

There is nothing for us in the budget, especially with regard to the textile and apparel industry. Looking at the difficult export scenario, some support or relief was a must for the apparel industry. But such uplifting measures are absent for the entire textile value chain.

Having a neutral approach, some of the apparel exporters think that budget should not be seen in the light of textile and apparel industry only. Sudhir Sekhri, Chairman, Trend Setters International, Delhi says, “It will be unfair if I say that the budget has not much to offer for the apparel industry. Whatever positive announcement has been made, be it for the start-ups or for MSMEs or for the big corporates, will benefit to some extent our industry also. We have to understand that the Government has to balance a lot of things and is concerned with the overall economy rather than just for one particular industry.”

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