7 PM Editorial |TEXTILE SECTOR NEEDS A VISION AND MISSION| 20th June 2020

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TEXTILE SECTOR NEEDS A VISION AND MISSION

The Idea of Self-Reliance

 The Government of India has embraced ‘atma nirbhar’ or ‘self-reliance’ as a development strategy to reboot the Indian economy. It is about tapping India’s inherent strengths to emerge stronger as a nation, economically and otherwise. The larger vision of a ‘Atmanirbhar Bharat’, thus, is not just import substitution but to build capacity for manufacturers in India to dominate the global market.

The idea of ‘Atma Nirbharta’ i.e. Self-Reliant can succeed only when requisite focus and attention is given on those sectors that are already self-reliant and are on a take-off stage to dominate the global market. The Textile Sector is a case in point.

Why is the Textile Sector important?

• Abundance of Raw Materials: It is the largest producer of cotton, accounting for 25 per cent of the global output. It is also the second largest producer of man-made fibres — polyester and viscose.
• Agglomeration advantage of the entire value chain:Its inherent and unique strength is its incomparable employment potential owing to the presence of the entire value chain from fibre to apparel manufacturing within the country.
• Employment generation:It is the biggest employer after agriculture and provides direct employment to 4.5 crore people and another 6 crores in allied sectors.
• Labour Availability and Market:Labour availability is plenty and, most importantly, a strong domestic market exists.
• Potential for Social Transformation:India needs to generate jobs that pay well, provide social protection to workers, support efficient production for export markets, and hold the potential for social transformation.
• Foreign Exchange Earnings:India is the second-largest manufacturer of textiles and clothing in the world. India is also the second-largest exporter of textiles and apparel with a share of 5% of global trade. This sector accounts for seven per cent of India’s manufacturing output, two percent of GDP and 12 percent of exports worth $40 billions.

 Overview of the Textile Value Chain

Textile sector includes cotton, jute, silk and woolen textiles. While India has the advantage of the entire value chain in the industry, currently the value chain is uncompetitive. The figure below from NITI Aayog indicates the current status of textile value chain (GVC) in India:

Challenges in the Textile Sector

• Lack of Scale:While India’s spinning capacity is of a global scale, the same cannot be said about weaving and apparel making. In fact, apparel units in the country have an average size of 100 machines. Compare this with Bangladesh which has on an average of at least 500 machines per factory.
• Fluctuation in Availability of Raw Materials:Vagaries of monsoon affects the productivity in rainfed cultivation areas. Severe competition from other crops due to MSP further deters the farmer from growing jute.
• Skewed Policies: GST on cotton is uniformly 5 per cent for fibre, yarn and fabric. But not so for man-made fibres (MMF), which are taxed at 18 per cent for fibre, 12 per cent for yarn and 5 per cent for fabric. This inverted tax structure makes MMF textiles costly. This explains why it accounts for just $6 billion of the $39-billion textile exports. But 72 per cent of the global textile fibre consumption is MMF.
• Problem of Contamination: High contamination level and poor quality of fibre, both in fineness and length, are major concerns that need focused attention. Pests attack like bollworm attack on cottons further decreases the quality.
• Obsolete Technology:Approximately 95% of the weaving sector in India is unorganized in nature.
  • It has challenges such as inadequate know-how, low focus on research, innovation in new product development and low technology upgradation.
  • Further, low productivity and automation levels also remain one of the biggest woes for the weaving industry.
  • In terms of technology adoption in the weaving sector, India has only 2% share in global shuttleless looms (i.e. modern looms) installed capacity.
• Stagnating Exports: The share of textiles in India’s overall exports has declined from 15 per cent in FY16 to 12 per cent in FY 19. Relatively newer entrants like Bangladesh, Vietnam and Cambodia have gained substantially during this period. On the other hand, India’s apparel exports declined from $18 billion in FY17 to $17 billion in FY19.
• Lack of Trade Agreements:Preferential Trade Agreements, including FTAs, help gain duty-free access to large textile markets such as the EU, Australia and the UK which, otherwise, levy 12-14 per cent import duty. They will help Indian players counter Bangladesh, Vietnam, etc. India’s FTA negotiation with the EU, Comprehensive Economic Cooperation Agreement with Australia and FTA with the USA have been in limbo for years. FTA with the UK after Brexit will face much more difficulties.

Competition from Other Economies

• China: China has a substantial share of 51% in cotton fabrics when compared to India’s 5%–6%.
• Bangladesh:Bangladesh imports are highly competitive because it gets duty free access due to its ‘least developed country’ status. Recently, China through its economic diplomacy have waived off tariffs on 8256 products of Bangladesh. Bangladesh’s apparel exports have risen from $26.60 billion in 2015 to $33 billion in 2019.
• Vietnam:Vietnam has increased its global export share of cotton yarn from 5% in 2012 to 15% in 2016 and has grown to become the third largest apparel exporter in the world. Vietnam has signed an FTA with the EU and its apparel exports will also suffer no duty from September.

Government Initiatives in the Textile Sector

• National Handloom Development Programme:Scheme will follow need based approach for integrated and holistic development of handlooms and welfare of handloom weavers.
• Amended Technology Upgradation Fund Scheme (ATUFS):The objective of the scheme is to facilitate augmenting of investment, productivity, quality, employment, exports along with import substitution in the textile industry and also to indirectly promote investment in textile machinery manufacturing.
• Scheme of Fund for Regeneration of Traditional Industries’ (SFURTI):Financial support is being provided for setting up of traditional industries clusters viz. Khadi, Coir & Village industries clusters.
• Scheme for Capacity Building in Textile Sector (SAMARTH):It aims to skill the youth for gainful and sustainable employment in the textiles sector covering the entire value chain of textiles, excluding spinning and weaving.
• PowerTex India:To avoid fluctuation in yarn price, government has launched a Yarn Bank Scheme as one of the component of PowerTex India
• Scheme for Growth and Development of Technical Textiles:It aims to set up centers of excellence for infrastructural support.
• Solar Charkha Mission:It is an enterprise driven scheme and envisages setting up of ‘Solar Charkha Clusters’ which will have 200 to 2042 beneficiaries (Spinners, Weavers, Stitchers and other skilled artisans).

Recommendations

• Promotion of Exports through FTA’s:The government should look through the prism of ‘atma nirbhar’ to adopt an appropriate ‘give and take’ policy and sign the FTAs. Job creation can be an important metric. Every $1 billion increase in textile exports adds 1.5 lakh jobs.
• Expanding Weaving Capacity: The weaving sector is the backbone of the textile industry. On the one hand, promoting the weaving industry gives impetus to the domestic spinning industry and on the other, it makes our garment’ sector globally more competitive.
• Investing in Technology Upgradation:To ensure rapid transformation of the weaving sector in India, under Amended Technology Upgradation Funds Scheme (ATUFS) of the Government of India, the weaving sector may be considered to get capital subsidy at par with garmenting and technical textiles.
• Promotion of Cooperatives:Cooperative societies must be promoted and strengthened in rural and semi-urban areas where there is large concentration of handloom weavers.
• Diversification of Textile Products:During COVID-19, the textile firms produced personal protective equipment worth 10,000 crore from zero. Technical textiles further needs to be promoted.

Conclusion

India needs a fresh blueprint for the textile sector. Once that is drawn up, the country needs to move into mission mode to achieve it. ‘Atmanirbharta’ will not be possible if the government fails those sectors that are already self-sufficient and capable of dominating the global market.

With focused interventions in this sector, we might enhance its performance in terms of more investment, employment generation and export earnings.

Source: TheHinduBusinessline

Mains Practice Question

1. Analyse the issues being faced by the textile sector in India. Suggest measures to address them. [15 Marks, 250 words]