Union Budget 2017 provides big boost to textiles sector; here’s why

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Chennai | Published: February 4, 2017 2:40:15 AM

Higher fund allocation for labour skilling and end-to-end logistics solutions, including rail and coastal shipping last-mile connectivity, will help the country’s textile industry to achieve the $350-billion target in next few years as set by the union government, industry experts have said.

Though there was no big announcement in the Budget, continuing with the existing tax structure, including service tax and optional Cenvat route extended for textile industry till GST is implemented, has been considered as a big boost for the sector.Though there was no big announcement in the Budget, continuing with the existing tax structure, including service tax and optional Cenvat route extended for textile industry till GST is implemented, has been considered as a big boost for the sector.

Higher fund allocation for labour skilling and end-to-end logistics solutions, including rail and coastal shipping last-mile connectivity, will help the country’s textile industry to achieve the $350-billion target in next few years as set by the union government, industry experts have said. Though there was no major announcement in the Budget, continuing with the existing tax structure, including the service tax and optional Cenvat route extended for textile industry till the GST is implemented, has been considered as a big boost for the sector.

The cluster approach for contract farming would greatly benefit the predominantly cotton based textile industry in India, where more than 80% of MSMEs are located across the country.

The government’s proposal to allocate funds for affordable housing scheme (as sought by the textile sector) is a boon to the sector.

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While the overall allocation for the textile sector has remained flat, there has been an increase in allocation towards remission of state levies to R1,555 crore for 2017-18 from R400 crore for 2016-17, which is likely to result in 1-1.5% cost savings for a section of exporters.

Speaking to FE, Raja M Shanmugham, president of Tirupur Exporters’ Association (TEA), lauded the enhancement of allocation of fund to Mudra Bank from R1,36,000 crore to R2,44,000 crore which will encourage the new entrepreneurs in the region to invest in sectors such as knitwear.

“The announcement on allocation of fund for affordable housing scheme is quite encouraging which has been requested by the association since there has been a plan to construct one lakh houses for labourers.

The profit exemption announced for construction of 60 sq mt will encourage more promoters to enter for construction of houses.

Similarly, the like change in labour reforms, which has been pending for sometime, would also help clusters such as Tirupur where they have lakhs of workers working for day and nights.”

A sum of R2,200 crore to upgrade labour skilling is also a major measure for labour intensive industry like textiles, he added.

Moreover, the allocation to textile sector remains relatively unchanged — R6,230 crore in 2017-18 from R6,290 crore in 2016-17. However, the lesser allocation for both Amended Technology Upgradation Fund Scheme (ATUFS) and cotton procurement is offset by higher allocation for the textile package announced on June 22, 2016.

With a significant proportion of textile sector in the SME segment, reduction in tax rate will improve bottomline of companies, felt Crisil in its analysis.

M Senthilkumar, chairman, Southern India Mills’ Association (SIMA) said the objective of doubling farmers’ income, housing for one crore rural Indians, skilling of youth by establishing 100 India international skill centres, development of infrastructure to provide end-to-end solution by integrating road, rail & ship would greatly benefit the textile industry.

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