Budget 2022: Weaving India’s textile growth story
The Union Budget 2022-23 announced yesterday presented the government’s plans to increase capital expenditure by 35% and fuel growth for an economy recovering from 3 waves of the COVID-19 pandemic. The Ministry of Textiles is keen to mobilise all initiatives which continue to focus on the development of the sector and industry at large.
Allocation for the textile sector have witnessed an 8.1% increase in FY23 compared with the revised budget allocation for FY22. According to the Union Budget presented yesterday, of the total allocation of $ 1.6 Bn for the textile sector for upcoming financial year, $ 18 Mn is for Textile Cluster Development Scheme, $ 13.3 Mn for National Technical Textiles Mission, and $ 2 Mn each for PM Mega Integrated Textile Region and Apparel parks scheme and the Production Linked Incentive Scheme. The Centre has also allocated $ 14 Mn for FY23 towards the Raw Material Supply Scheme.
A major announcement providing relief to exporters was related to the exemptions to incentivize exports in handicrafts, textiles, and leather garments. To incentivise exports, exemptions will be provided on items such as embellishment, trimming, fasteners, buttons, zipper, lining material, specified leather, furniture fittings and packaging boxes that may be needed by bonafide exporters of handicrafts, textiles and leather garments, leather footwear and other goods. This exemption will lead to global competitiveness of exports further leading to employment generation in the sector.
During April-December, 2021 the total Textiles & Apparel including Handicrafts exports was $ 29.8 Bn as compared to $ 21.2 Bn for the same period in its previous year. Textile sector's exports, comprising textile, apparel, and handicraft, rose 14.6% year-on-year during April-December. Cotton yarn, fabrics, made-ups and handloom products rose 43% on year during the period, and jute products exports increased 33%. The sector has maintained trade surplus with exports higher than imports.
The exemptions announced during the budget will further boost exports in the sector. India’s textile exports is expected to grow by 81 per cent to $ 65 Bn by 2026 from the pre-covid level of around $ 36 Bn in 2019 (implying 9-10 per cent compound annual growth rate).
Announcing an array of custom exemptions and tariff simplification, the one for textiles will go many steps forward in achieving the objective of ‘Make in India’ and ‘Atmanirbhar Bharat’. The implication for the Customs duty includes the ad valorem tax (which is imposed on the basis of the monetary value of the taxed item) and specific duty. The specific duty is likely to be rationalized for certain fabric items and removed for some of the garments.
By Mishika Nayyar, Rajeshwari Chadha and Radhika Chhabra.