The stage is all set for Union Budget 2023-24. It will be the last full budget of the current Union Government before the Lok Sabha elections which are due to be held in April-May of 2024. Steps to control inflation; ease of doing business; policy alignment; stability in cotton price; import duty removal on cotton; support on traceability and sustainability and steps that benefit the entire value chain are some of the major concerns for the various stakeholders of the textile and apparel value chain. In discussion with Apparel Resources, various stakeholders shared their suggestions and probable expectations from the upcoming budget.
It is worth mentioning here that for the textile and garment industry, the Government has contributed a lot be it in terms of the revised rates of the Remission of Duties and Taxes on Exported Products (RoDTEP), faster work on PM MITRA and Production Linked Incentive (PLI) etc.
But looking at the highly challenging scenario of India and the global environment currently, the coming financial year is crucial not only for the industry but for the country as a whole and hence the announcements made in the upcoming budget are much-awaited.
Retail sector’s priority is to accelerate its recovery
As inflation is still a challenge and impacting demand also, Shivendra Nigam, CFO, Cantabil Retail India Ltd., suggests that the Government should focus on curbing inflation in the upcoming budget so that the greatest challenge of lesser cash flow in consumers’ pockets can be compensated, which would directly impact retail sales. “Considering the existing market scenario, which includes limited consumer enthusiasm for purchases and a reduction in the spending ceiling, consumers’ spending limits would eventually increase, as high-interest rates prevented them from making purchases and managing their cash flows,” he states.
He also adds that, “We strongly support the Government’s proposed draft policy, which aims to develop a single window-clearing mechanism to get all registrations, licenses or clearances for businesses and are looking forward to retail space as well. However, the transition from an unorganised to an organised state is still underway in the fashion and retail sectors. “
The retail sector is a versatile industry and has emerged as one of the most dynamic and fast-paced industries recently due to the entry of several new players. Agreeing with this, Suman Saha, CEO, Arrow says, “The Union Budget 2023-24 comes at a very relevant time, as the nation needs the right set of incentives and support measures to accelerate its recovery. This year’s budget must focus on policy alignment for the retail sector since the Indian consumer’s purchasing power is increasing and branded goods in categories like apparel, footwear etc., are gradually evolving into business and leisure that are well-liked by the urban Indian consumer.”
Leading lingerie brand Clovia, that recently opened 50th EBO and has massive future planning in the same direction, expects the Union Budget to include incentives to enable empowerment of women entrepreneurs in Tier-2,Tier-3,Tier-4 geographies (including the ones who may be running small enterprises from their homes) to help them become self-reliant and further scale their enterprise.
Neha Kant, Founder & CRO, Clovia says, “This is in line with Clovia’s partnership programme wherein we are already assisting buddy entrepreneurs to build their technical expertise, develop products and create sustainable revenue streams for themselves. Policies and relief measures to assist domestic manufacturers like us in developing a strong homegrown brand would also help boost the retail landscape.”
Akhil Duggar Jain, ED, Madame (Jain Amar Group) emphasises few points like ‘Ease of Doing Business’. Few years ago, the Government had proposed to formulate ‘National Retail Trade Policy’. The Union Minister of Commerce & Industry had informed in the Rajya Sabha on 23rd March 2020 that stakeholder consultations are being held in this regard. The Government had also set up a National Traders’ Welfare Board with the objective of welfare of the traders and their employees, simplification of the acts and rules applicable to traders, reduction of compliance burden and improvement in access to funds for traders. As per Akhil, the action on formulating the ‘National Retail Trade Policy’ should be expedited to provide the much-needed ‘Ease of Doing Business’ to the fashion retail industry.
“The retail industry is awaiting re-introduction of Technology Upgradation Fund Scheme (TUFS) to reduce its cost of technology upgradation as it will benefit the entire supply chain. PLI for garment industry should be announced soon in which MSMEs are also able to participate,” Akhil further adds.
Sanjay Vakharia, CEO, Spykar Lifestyles is also concerned about inflation as he says that the current atmosphere seems to be a little in flux with so much conversation around global recession and inflationary pressures. The industry is facing some headwinds since a few months as far as the discretionary spends are concerned.
“While we will expect the Government to create an environment that is conducive to help our industry meet these challenges coming straight out of two years of pain caused by Covid in the forthcoming budget.”
Sanjay further adds that besides aiding demand creation, the following are a few efforts which will go a long way in growing sustainably:
- The volatility that the fluctuation in cotton prices created in the past was very unsustainable for the industry. Hence a mechanism should be formulated whereby a cotton price stabilisation fund can be set up to help the industry meet reoccurence of the same.
- A fund should be set up for promoting traceability and sustainability in textile value chain. In the context of global warming and containing waste and landfill, this would go a long way in helping to save the environment.
Daksh Kapoor, Chief Marketing Officer, Kapsons Group highlights that with all the progress of last year, there’s one fact that cannot be overlooked right now; the world economy, which had just recovered from a pandemic-induced slump, is now headed toward a recession. Although 2023 growth projections for India are largely hopeful, countering this contingent dip in demand and disposable income through tax schemes can be a key factor in keeping the fashion retail industry’s growth afloat.
“The Government’s aid to digitisation in Union Budget 2022-23 helped companies expand their network, especially to Tier-2 and Tier-3 cities. We at Kapsons Retail Pvt. Ltd., focus on facilitating the growth of MSMEs and the Government’s ONDC has been another win for online selling. All in all, expectations are plenty and potential is brimming; inducing spending during inflation, giving impetus to small and local businesses through Make in India, all the while the Indian economy topping the growth charts,” says Daksh.
GST: Still requiring improvements
GST implementation is going to complete six years and there have been many changes as per the industry’s demand and requirements. Still industry is looking for more improvement/changes with regard to the same. The consumer spending on fashion apparel falls under ‘discretionary spending’ category.
Sanjay Vakharia believes that to make business more easy and navigable in the GST regime, the GST input credit process should be tightened. Current artificial barriers to avail input tax credit need to be removed and it should be made possible for the assessee to take credit of the input tax that he has paid for.
“Certain complexities in the GST structure are still a challenge for most of the producers of fashion apparel, which makes it equally challenging for the organised players dealing with them. So, ease of compliance will be a boost for the fashion retail industry,” says Shivendra.
Akhil believes that GST at 12 per cent on fashion apparel is causing high cost for end-consumers. Due to inflationary pressures, the discretionary spending of the consumers is going down. GST on all apparel should be fixed at a standard rate of 5 per cent to give the much-needed fillip to the fashion retail industry.
“Most of the inputs, services and capital goods required by the retail industry attract a higher rate of GST (mostly 18 per cent), while the output rate of GST is lower. This results in unutilised input tax credit of GST causing blockage of working capital and increased cost of operations. The Government should amend the formula for calculating refund under the inverted duty structure category in order to allow unrestricted refund of unutilised GST on services as well as on capital goods,” says Akhil.
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Various trade bodies, associations have submitted their demands to the Finance Ministry and these demands include few of their long pending expectations and at the same time they have suggested few new initiatives also.
Like Tirupur Exporters’ Association (TEA) urged to announce the increase of interest benefit under Interest Equalization Scheme to 5 per cent across the board and help protect the knitwear industry. TEA is also looking to extend ‘Export Refinance Scheme’.
In a pre-budget meeting with the Union Finance Minister, Federation of Indian Export Organisations (FIEO) raised concerns as depreciation of the rupee against the US dollar is affecting exports’ competitiveness, so the export sector requires Government support.
Also Read: Tirupur Exporters’ Association submits pre-budget memorandum to Ministry of Finance
Not only trade associations, individual companies have long list of expectations from the budget which includes recognition of the importance of textile and apparel industry in various states. Though it can be mentioned here that state-specific support regarding textile and apparel industry has been rare in the Union Budget.
Also Read: Telangana needs sufficient funds in the next Union Budget to strengthen its textile industry
Looking at the Government support to the industry in recent years, it will not be wrong to expect that the industry will not be disappointed with the upcoming budget. Time and again, it has been said that compared to the textile and garment industry, there is hardly any sector that has such a large potential of job creation. Massive export targets set by the Government will be not possible without proper support.