At least 7,50,000 jobs have been created in the textile and garment sector in the last fiscal, mostly after the government announced a Rs6,000-crore package in June 2016 along with some radical changes to labour laws, according to a quick estimate by the textile ministry.
As many as 3,26,471 direct and 4,24,412 indirect jobs were created in the sector in the last fiscal, according to the estimate. Investments to the tune of Rs8,544 crore flowed into the sector through the ministry’s flagship scheme — the Amended Textile Upgradation Fund Scheme (A-TUFS) — that was tweaked last year to give additional subsidy to the garment makers, as part of the package.
A senior government official said the jobs data are based on the investment that flowed into various segments (such as weaving, garmenting, processing technical textiles and composites) through only A-TUFS. Employment generated by the investments made outside the A-TUFS is not captured in this estimate (The capital-intensive spinning sector is now out of the A-TUFS ambit).
The estimate is based on the thumb rule, often adopted by government and industry executives, that every Rs1 crore of investment creates as many as 70 direct jobs in the labour-intensive garments segment and 30 direct jobs in the spinning segment. Similarly, every 10 direct jobs created in the textile and garment sector leads to the generation of 13 indirect jobs (such as in hand embroidery, lacework, handwork, specialised dyeing and washing and logistics).
However, some industry executives said such a method — although used often for a quick estimate of job creation — may not give a correct picture, especially when the jobs data are derived from A-TUFS investment. This is because subsidy under A-TUFS is offered mainly for setting up new units as well as for the upgrade of technology. While setting up new units may create jobs, technology upgrade may even result in a reduction in workforce.
According to the textile ministry data, garment exports went up almost 9% after the package was announced. Between July 2016 and March 2017, garment exports rose to $13.47 billion, against $12.37 billion a year earlier. By contrast, overall textile and garment exports dropped 3.5% in the last fiscal to $38.6 billion, mainly due to a decline in outbound shipments of textiles.
Still, the additional job creation, investments and exports are way off the government’s ambitious targets. The government was targeting one crore new jobs, additional investments of Rs74,000 crore and extra exports of $30 billion over three years, through last year’s garments package.
Sources said one of the main reasons for the non-fulfilment of the targets is that the several notifications required to implement the package came at much later even though the package was announced in late June. For instance, the refund of state levies under the duty drawback scheme was rolled out only in September, while the proposed fixed-term employment rules to allow garment factories to hire contractual workers for a fixed period were notified as late as October by the labour ministry. Also, a critical component of the package — voluntary contribution to the EPF by workers earning less than Rs15,000 a month — is
yet to be implemented, as it involves an amendment to the EPF Act for which parliamentary clearance is awaited.
To boost competitiveness of the garments sector, the government in June announced a raft of measures, including the introduction of fixed-term employment, optional contribution to the EPF by workers earning less than Rs15,000 a month, the refund of employers’ contribution of the EPF, additional incentives under the A-TUFS, enhanced duty drawback and some income tax relief, for the garment sector.