Union Budget 2021: Budget a great balancing act

February 3, 2021 12:10 AM

The FM’s confirmation that the GST Council would work to correct inversion of duty structures is also welcome, particularly for synthetic fabric/apparel manufacturers who bear the brunt of non-refunded GST because of inverted tax structure.

MITRA SchemeFor textiles and apparel, a positive is the MITRA scheme

By Gautam Nair

For all industries, including textiles and apparel, the push in modernising infrastructure, improving logistics, creating district-level export hubs, setting quality standards for manufacturing and developing ports is welcome. Increased allocation for R&D in public institutions is encouraging, and hopefully the FM will see fit to extend this to the private sector, going forward.

Specifically for textiles and apparel, a positive is the MITRA scheme announcing seven mega textiles parks to be launched in the next three years. If these are planned with plug-and-play facilities, good logistics for material/workers, in-house utilities and special work rules for workers that allow for competitive manufacturing, it would help improve India’s competitiveness in this sector.

The PLI scheme has drawn serious criticism from textiles and apparel industry, for its limited coverage of products as well as its high threshold limit for investment and growth. Industry has strongly represented a re-look at these parameters and hopefully this will be re-examined. The National Technical Textiles Mission with a four-year implementation period from FY20-23 and an outlay of `1,480 crore is a welcome step.

The FM’s confirmation that the GST Council would work to correct inversion of duty structures is also welcome, particularly for synthetic fabric/apparel manufacturers who bear the brunt of non-refunded GST because of inverted tax structure.

Gautam Nair, Managing Director, Matrix ClothingGautam Nair, Managing Director, Matrix Clothing

An unexpected, and undesirable, pronouncement in the Budget was the imposition of 10% import duty on imported cotton “to help farmers”. Cotton is imported only in the ELS (Extra Long Staple) varieties and where we need contamination-free cotton. As businesses move from China, India’s ability to offer cotton products across different counts was an important strength. ELS and contamination-free cotton is hardly grown in India, and the Kasturi scheme launched by the textiles minister in October 2020 towards developing Indian fine counts cotton is well-intentioned, which will take a few years to deliver results. Creating a tariff wall at this early stage leads to much pain and little gain. It will steer value-added export business towards Bangladesh and Vietnam, will give a fillip to the unprecedented increase in cotton/yarn prices in India in the last few months, will create distortions in our fibre policy where cotton would suddenly have a higher duty (intended 10%) than polyester/nylon (5%), and create unnecessary friction with our trade partners like the US from where we import this fibre. Many of the FM’s policies will depend on good implementation; here, I borrow the FM’s quote from Rabindranath Tagore in her speech: “Faith is the bird that feels the light and sings when the dawn is still dark.”

We live in that faith.

The author is Managing Director, Matrix Clothing

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