Deep dive into the budget from the textile and apparel industry’s perspective

A quick look at the budgetary allocation shows that there is more than a 20 per cent increase in budgetary grants for the textile industry which could be used for the growth of the industry. The total grant for textiles for the year 2023-24 is fixed at Rs. 4,389.34 crore which is about 22.6 per cent higher than the revised budget grant for 2022-23. In the present budget, a grant of Rs. 200 crore has been kept for PM MITRA Parks, while for PLI Scheme, the grant is budgeted at Rs. 5 crore. Higher budgetary allocations are for schemes promoting capacity building and investments like National Technical Textiles Mission (NTTM), PM-MITRA and textile development cluster scheme.

There are a few more good decisions taken in this budget. Overall this budget is a positive, growth-oriented and forward-looking budget. The focus on infrastructure, investment, green growth, youth power and inclusive development will boost India’s journey to be the fastest-growing robust economy. The announcement to cover more sectors under the PLI scheme and support to the MSME sector will help thrust exports and investment in the country.

But at the same time, some of the decisions will have their negative impact also.

The Government could have avoided the increase in the Basic Customs Duty on textile machinery from 5 per cent to 7.5 per cent as the country is not even producing 20 per cent of the machinery requirement. This will impact the new investments planned in this sector. Industry has urged retaining 5 per cent import duty for all types of textile machineries for the next three years or till the domestic manufacturers establish themselves to meet the domestic demand. This will have some impact on the global competitiveness and also the recently announced PLI Scheme and PM MITRA Scheme in the absence of Technology Upgradation Fund Scheme which was in vogue from 1st April 1999 to 31st March 2022.

There has been no announcement on the continuance of ATUF Scheme in the Union Budget and it is being hoped that Government would announce something with regard to it in near future.

The increase in allocation for the MAI Scheme from Rs. 160 crore in 2022-23 to Rs. 200 crore in 2023-24 is a welcome one but this may not be adequate as the global trade shows are increasingly giving opportunities for showcasing which need to be exploited. A planned scheme for aggressive overseas marketing may be notified with a sizable corpus to encourage exporters to showcase globally.

Textile and apparel Industry got (direct/indirect)

• Increased 38 per cent allocation of ATUFs from Rs.650 crore in 2022-23 to Rs.900 crore in 2023-24; this will help in the release of payment for pending cases faster.
• To enhance the productivity of extra-long staple (ELS) cotton, the Government will adopt a cluster-based and value chain approach through Public Private Partnerships (PPPs). This will facilitate collaboration between farmers, state and industry for input supplies, extension services and market linkages. In the long run, it will be helping garment industry provide raw material security.
• Five new HS Codes for cotton have been identified for further classification of cotton as per staple length. This will help in calibrating policy support for the segments which are import dependent or need further incentivisation.
• The support for the procurement of cotton by the Cotton Corporation under the Price Support Scheme is withdraw. Although it is difficult to predict the impact at this stage, a chunk of industry feels that it looks like the Government is trying to move towards price discovery and self-sustainable farm-to-factory cotton movement.
• Fund for RoDTEP scheme has been increased from Rs.13,699 crore in 2022-23 to Rs.15,069 crore in 2023-24.
• The allocation for RoSCTL scheme is increased from Rs.7,641 crore for 2022-23 to Rs.8,405 crore for 2023-24.
• Rs 9,000-crore corpus for a revamped credit guarantee scheme will alleviate the stress of small and medium enterprises. It will enable additional collateral-free guaranteed credit of Rs. 2 lakh crore reducing the cost of the credit by about 1 per cent. The textile industry would be the major beneficiary out of the scheme since more than 80 per cent of the textile units come under the MSME category.
• The increased allocation for the Interest Equalisation Scheme (IES) from Rs. 2376 crore in 2022-23 to Rs. 2932 crore in 2023-24, which is up by 23 per cent, will help support exports.
• The focus on building a green infrastructure will go a long run in reducing our carbon footprints and making textile and apparel facilities sustainable.
• The Government has identified 100 critical transport infrastructure projects, for last and first mile connectivity for ports, and will be undertaking investment of Rs. 75,000 crore (incl. Rs. 15,000 crore from private sources), and will promote coastal shipping for passengers and freight.
• Launch of Pradhan Mantri Kaushal Vikas Yojana 4.0 will further facilitate skilling lakhs of youth with Industry 4.0 courses like coding, AI, robotics, mechatronics, IOT, 3D printing, drones and soft skills. The focus on quality education, skilling and training will help in creating a credible workforce which will be fit to the industry quickly, ensuring a strong backup to the manufacturing jobs. The Direct Benefit Transfer under pan-India National Apprenticeship promotion scheme has been rolled out.
• The establishment of Skill India International Centres would further prepare a skilled workforce for international opportunities.
• 50 years interest free loan to states to incentivise infrastructure investment, highest capital outlay for Railways, 100 infrastructure projects in port will have a positive impact on overall business and the employment sector.
• States will be encouraged to set up a Unity Mall in their state capital or most prominent tourism centre or the financial capital for promotion and sale of their own ODOPs (one district, one product), GI products and other handicraft products, and for providing space for such products of all other states.

Industry Reacts

“The budget has focused on growth potential of the Indian economy by focusing on investment and infrastructure to help the country remain as the fastest growing economy as projected by the international institutions,”  Dr A Sakthivel, President, FIEO  

“It’s a forward-looking, growth-oriented budget. Change in the direct tax will boost saving and make our economy resilient to face the tough time. Removing a large number of compliances converting over 3400 legal provisions into decriminalisation and amending 42 Central Acts, will help smooth revival of businesses,” Narendra Goenka, Chairman, AEPC 

“CITI termed the budget as pragmatic and futuristic laying a strong foundation for India @100! The new AI-driven data collection of agricultural products will also help in better crop estimation and lend predictability to cotton prices,” T. Rajkumar, Chairman, CITI

“The Government has given thrust for inclusive growth, infrastructure and investment green growth, skill development, etc., that would greatly help the highly labour, power and capital-intensive textile industry,” Ravi Sam, Chairman, SIMA

“The priority given to infrastructure development will go a long way for reduction of logistics cost, a major need for the exporting units. The focus given on green growth, is a major discussion point by the knitwear industry now in Tirupur cluster,” K.M.Subramanian, President, TEA

“As expected nothing really for Textile Industry in budget except more disposable income in hands of consumers due to tax cuts plus with inflation taming means more consumption. The separate HS Codes for ELS Cotton indicates the intent of the Government to differentiate the same in import duty going ahead,” Sanjay K Jain, MD TT Ltd & Chairman, ICC National Textiles Committee

“The Government’s initiative of creating a special accelerator fund for agriculture is a step towards turning agri-tech into a sunrise sector for investments. The decision to relax taxation for start-ups for up to 10 years, coupled with the setting up of bio-hubs in rural areas, will greatly ease the process of setting up units in villages. Our efforts to improve the supply-chain network for all our stakeholders in the natural fibre ecosystem supply chain receives a major boost from the decision to support collaborative projects between farmers, states and businesses to provide input supply extension services and market connections. Besides providing direct access to global markets, ready access to the internet will expose the farming community to the best trade and agricultural practices the world over. The promise of financial assistance to traditional artisans such as weavers, who are ReshaMandi’s strategic stakeholders and partners, is a decision we welcome with much delight,” Mayank Tiwari, Founder and CEO, ReshaMandi

“It is encouraging to see that key pillars of growth include skilling and job creation, opportunities and reduction of compliance burden for small entrepreneurs and the empowerment of women entrepreneurs. This is consistent with our expectations of including incentives to enable the empowerment of women entrepreneurs in Tier-2, Tier-3 and Tier-4. Reduced tax burden for small entrepreneurs will mean reduced supply-chain costs and hence more competitive markets. Steps like carry forward of losses for start-ups in case of shareholding, extension of date of incorporation amongst other steps is a step forward for the start-up ecosystem,” Abhay Batra, Co- Founder & CFO, Clovia

“The 8.25 % custom duty will be implemented on all types of high-speed weaving machines imported from any country. The overall capital investment will be expensive by 8.25%, which will hamper the growth in installing the high speed weaving machines. Surat will face heat of this decision,” Ashish Gujarati, President, The Pandesara Weavers Co-op Society Ltd.

“The proposal on increased spends on capex will keep the wheels of growth in motion. The reduction in personal income tax slab and eliminating deductions will help in bringing in more spends and marginally higher dispensable incomes. Currently we are facing tepid demand due to recessionary pressures; both overseas and in our country. We therefore welcome the budget this year as it is focused on growth, economic progress, modernisation and sustainability,” Sanjay Vakharia, CEO, Spykar Lifestyle

“At the macro level, with an increase in income tax exemption limits and rationalisation/reduction in income tax slabs and rates, there will be more money in the hands of the aspiring middle-class and will lead to higher consumption which augurs very well for boosting the much needed retail demand,” Priyavrata Mafatlal, Vice-Chairman, Arvind Mafatlal Group

“There are certain announcements that may benefit the handicrafts sector which include PM Vishwakarma Kaushal Samman, wherein a package for artisans has been conceptualised which would certainly help in the capacity building of the artisans engaged in the sector. Initiatives like reduction in cost of credit by 1 per cent through infusion of Rs.9000 crore corpus for the MSMEs would help the sector,” Raj Kumar Malhotra, Chairman-EPCH

Also Read: Textile value chain stakeholders’ expectations from the Union Budget

Analysis of Demand of Grants for Textile Sector in Budget 2023-24 (All figures in Rs. crore)