Need for a new India national textile policy

Almost three centuries ago India was the richest country dominating the world economy with textile exports. However, lapses in our policies and certain decisions in those years allowed the British to rule upon us.

As a result of the colonisation, India was exploited for the benefit of countries progressing as a result of the Industrial Revolution.

As a result of the above, India has never been able to secure a similar global standing as it did three centuries ago.

• India’s textile sector, covering everything from fibre to garments, has the second-largest employment after agriculture. Textile sector has the potential to double this employment in the next seven years as per the vision document of the union textiles ministry.
• Economic survey 2017 had also highlighted the importance of textile sector with regard to generating jobs that are formal and productive, having potential for broader social transformation and generating exports and growth.
• It is a sector which not only provides livelihoods to millions of households, but is a storehouse of traditional skills, heritage, and a carrier of heritage and culture too. Artisans, weavers, handloom workers are custodians of designs and skills which they have been inheriting and bequeathing for ages.
• This is also a sector which is undergoing a huge churn due to automation, digital printing and the relentless rise of e-commerce. All these three developments threaten to completely change the face of this industry.
• Hence the below article assesses what should be India’s strategy to ride this disruptive wave and advocates for the need of national textile policy document, on the same lines of the national telecom policy of 1999, which was a game changer, and led to the upsurge of India’s telecom revolution.
• Indian textile sector is undergoing a huge contemporary changes but the last official national textile policy was framed 17 years ago.

How important is textile industry?

• India’s textile sector has the second-largest employment after agriculture, employing 32 million workers.
• It has the potential to double this employment in the next seven years as per the vision document (for 2024-25).
• It is a sector which provides livelihoods to millions of households.
• It is also a storehouse of traditional skills, heritage, and a carrier of heritage and culture.
• What is the reason behind India’s slowdown?
• India has a rich mix of synthetic and natural fibres and yarns, but still it remains a cotton-focused country.
• India was finding it profitable to export raw cotton to China because of Chinese government’s support for stockpiling cotton yarn.
• Also, the presence of cotton in yarn, fibre, fabric and garments is close to 70% of usage within India, which is also reflected in exports.
• But, the global trend is exactly the opposite, i.e., it has 70% of synthetics and man-made fibres.
• So, India’s domestic and export mix is the opposite of global fashion and demand trends.
• What is the reason behind India’s inverse trend?
• The inverse skew of fibre usage in India is due to the skewed tax treatment.
• Until the roll-out of the GST, the cotton value chain was completely free of indirect taxation.
• Whereas the man-made fibre suffered a dead-weight tax of 12% excise.
• That anomaly was supposed to be removed by uniform GST.
• Instead of a fibre-neutral policy, we have a dual GST structure, with 18% GST on upstream, and 5% on all downstream, leaving an inverted duty structure.
• This has already led to much disruption, as can be seen in shutdowns or strikes in powerloom clusters in Bhiwandi or Coimbatore.

How important is textile industry?

• India’s textile sector has the second-largest employment after agriculture, employing 32 million workers.
• It has the potential to double this employment in the next seven years as per the vision document (for 2024-25).
• It is a sector which provides livelihoods to millions of households.
• It is also a storehouse of traditional skills, heritage, and a carrier of heritage and culture.
• What is the reason behind India’s slowdown?
• India has a rich mix of synthetic and natural fibres and yarns, but still it remains a cotton-focused country.
• India was finding it profitable to export raw cotton to China because of Chinese government’s support for stockpiling cotton yarn.
• Also, the presence of cotton in yarn, fibre, fabric and garments is close to 70% of usage within India, which is also reflected in exports.
• But, the global trend is exactly the opposite, i.e., it has 70% of synthetics and man-made fibres.
• So, India’s domestic and export mix is the opposite of global fashion and demand trends.

What is the reason behind India’s inverse trend?

• The inverse skew of fibre usage in India is due to the skewed tax treatment.
• Until the roll-out of the GST, the cotton value chain was completely free of indirect taxation.
• Whereas the man-made fibre suffered a dead-weight tax of 12% excise.
• That anomaly was supposed to be removed by uniform GST.
• Instead of a fibre-neutral policy, we have a dual GST structure, with 18% GST on upstream, and 5% on all downstream, leaving an inverted duty structure.

This has already led to much disruption, as can be seen in shutdowns or strikes in powerloom clusters in Bhiwandi or Coimbatore.

• Why there is an urgent need for a policy document?
• Textiles, along with agriculture, construction and tourism, has large-scale job creation potential.
• It is a sector dotted with small and medium enterprises, which make up 80% of the units.
• Thus, it is ideally positioned to be a poster child for ‘Make In India’.
• This is also a sector which is undergoing a huge change due to automation, digital printing and the relentless rise of e-commerce.
• These developments threaten to completely change the face of this industry.
• India’s share of textile exports in total exports (at 12%), is half of what it was in 1996.
• Bangladesh’s garment exports exceeded India’s in absolute terms back in 2003 and today, it exports twice that of India.
• Even late starter Vietnam overtook India in 2011.
• So, to address challenges like changing consumer and fashion trends, modernization of machinery, skill upgradation, a fibre-neutral tax policy and meeting the needs of the e-commerce phenomenon, we need a national policy and implementation plan.

Need for a new policy

• The last time a clearly discernible, printed and published policy was brought out by the ministry of textiles was 1985.
• The 1985 policy was critiqued as a disastrous one as it did not serve the artisan’s agenda. One of the many consequences of the policy was the influx of synthetic garments and saris that may have been convenient to “wash and wear” and the easy transition to power looms that were supplied with synthetic yarn. However, it spelled dark days ahead for weavers used to weaving pure yarns, and worse still for the health of one’s skin in our extremely hot climate.
• Since then there has been no well-articulated policy for the entire textile sector that shows the proportion of attention and support given to mill fabrics (both private and national corporations), power looms and handlooms, or the government’s vision towards their balanced development of each.
• The world operated under a patently unfair quota system called the Multi Fibre Agreement (MFA), which shackled the growth of India’s textile and garment exports. The MFA was dismantled completely in 2005 and India was supposed to surge ahead. Instead we have lost steam. India’s share of textile exports in total exports, at 12%, is half of what it was in 1996.
• Bangladesh’s garment exports exceeded India’s in absolute terms back in 2003. Today it exports more than $35 billion worth of garments, twice that of India. Even late starter Vietnam overtook India in 2011, and now exports garments worth $32 billion.
• Their growth in exports has been at 20% per year, against India’s 8%. In overall textile trade globally, India has a share of merely 5%, against China’s 39%. In the sub-segment of synthetic fibres, India’s share is just 2%, against China’s 66%.
• While India has a rich mix of synthetic and natural fibres and yarns, including cotton, jute, silk, polyester and viscose, it remains a cotton-focused country. The presence of cotton in yarn, fibre, fabric and garments is close to 70% of usage within India, which is also reflected in exports. Only 30% is from synthetics and man-made fibres. The global trend is exactly the obverse, i.e. 70% consists of man-made fibres. So India’s domestic and export mix is the opposite of global fashion and demand trends.

The handloom, handicrafts and sericulture sector is largely unorganised and is operated on a small-scale through traditional tools and methods. Some of this is because of the reluctance of the informal sector to step into the limelight of the formal sector with GST.

Therefore, a coherent and holistic national textile policy on the lines of national telecom policy can give a much fillip to Telecom Sector and avoid the risk of losing to countries like Vietnam and Bangladesh.

Power Tex India Scheme

• Recently the Government has launched PowerTex India, a comprehensive scheme for powerloom sector development, simultaneously at over 45 locations in the country. Launching the scheme in Bhiwandi, Thane district, Maharashtra, the Union Textiles Minister, Smt. Smriti Zubin Irani said that Bhiwandi will be known for resurgence in Powerloom sector.
• Recalling that the powerloom sector alone employs over 44 lakh people, the Minister said that the scheme will especially benefit small powerloom weavers.

The comprehensive scheme has the following components:

• In-situ Upgradation of Plain Powerlooms
• Group Workshed Scheme (GWS)
• Yarn Bank Scheme
• Common Facility Centre (CFC)
• Pradhan Mantri Credit Scheme for Powerloom Weavers
• Solar Energy Scheme for Powerlooms
• Facilitation, IT, Awareness, Market Development and Publicity for Powerloom Schemes
• Tex Venture Capital Fund
• Grant-in-Aid and Modernisation& Upgradation of Powerloom Service Centres (PSCs)

Pradhan Mantri Credit Scheme for powerloom weavers and solar energy scheme for powerlooms

• The scheme, with an outlay of 487 crore for three years from 2017-2018, has nine major components, including two new ones.
• The two new schemes are: Pradhan Mantri Credit Scheme for powerloom weavers and solar energy scheme for powerlooms.
• Existing powerloom units, new ones, and group enterprises in weaving will now get 20 % of project cost with a ceiling of 1 lakh as margin money subsidy and 6% interest subvention, both for working capital and term loan up to 10 lakh for a maximum period of five years.

Subsidy
Powerloom units with maximum eight looms each will will be eligible for 50 % subsidy for going in for solar energy for captive use, be it on grid or off grid system.
Funds made available for upgradation of plain powerlooms, establishing yarn banks, and group workshed scheme have been increased and the minimum number of looms needed for group workshed scheme has been brought down to 24 from 48. Some of these existing schemes such as yarn bank and insitu upgradation of plain powerlooms have huge response already and these have been modified to benefit more weavers, Textile Commissioner Kavita Gupta told The Hindu. A helpline was introduced for weavers to get details of the scheme.

Conclusion
Textiles, along with agriculture, construction and tourism, have large-scale job creation potential. It is a sector dotted with small and medium enterprises, which make up 80% of the units. It is ideally positioned to be a poster child for Make in India.

But it needs a national policy and implementation plan, which can address these challenges: changing consumer and fashion trends, a significant demand for investment and modernization of machinery, massive skill upgradation, meaningful export incentives, a fibre-neutral tax policy, a big digital push in design and automation, and lastly, meeting the needs of the e-commerce phenomenon.