Can budget prop-up growth for textiles?

The National Technical Textiles Mission’s allocation saw a significant increase of 120.59 per cent, reaching Rs3.75 billion compared to Rs1.75 billion in 2023-24.

On July 23, Union Finance Minister Nirmala Sitharaman presented the 2024-25 budget in Parliament. The government has raised the allocation by 28 per cent to Rs44.17 billion.

Additionally, duty on wet white, crust, and finished leather for the manufacture of garments, footwear, and other leather products for export will be eliminated, down from the current 10 per cent. The duty on certain accessories used in the manufacture of textile and leather garments, leather and synthetic footwear, and other leather products for export will also be removed. Furthermore, the duty on real down filling material from duck or goose used in the manufacture of garments for export will be reduced to 10 per cent from the current 30 per cent.  

The National Technical Textiles Mission’s allocation saw a significant increase of 120.59 per cent, reaching Rs3.75 billion compared to Rs1.75 billion in 2023-24.

Technical textiles, which are designed for performance and functionality, are used in various sectors including construction, agriculture, aerospace, automotive, healthcare, protective gear, and home care. Unlike traditional textiles, which prioritise aesthetics, technical textiles offer superior performance. They are made from both natural and synthetic fibres such as Nomex, Kevlar, Spandex, and Twaron. Currently, India exports technical textiles, including medical apparel, worth about $2.5 billion and aims to increase this to $10 billion in the next five years.

The National Handicraft Development Programme saw a 38 per cent increase in its allocation, rising from Rs1.71 billion to Rs2.36 billion. The increased funding is expected to support various initiatives aimed at enhancing artisans’ skills, improving their market access, and fostering innovation in traditional handicrafts. The budget allocation for silk promotion increased from Rs8.75 billion to Rs9 billion. India, being the world’s second-largest producer of silk, employs approximately 9.2 million people in its sericulture industry, which is located in rural and semi-urban areas. However, due to high domestic demand, India also imports silk from several nations. The centrally sponsored schemes for promoting the usage of geotextiles in the North-East, PM-MITRA, protection of handlooms, and raw material supply received an allocation boost of 45.6 per cent, reaching Rs38.66 billion from Rs26.54 billion in 2023-24.

The allocation for the Amended Technology Upgradation Fund Scheme (ATUFS) has been reduced to Rs6.35 billion from last year’s Rs6.75 billion. Introduced in 1999 to foster a modern and vibrant industry, the Technology Upgradation Fund Scheme (TUFS) has evolved over the years, adopting various forms and names such as the Modified Technology Upgradation Fund Scheme (MTUFS), the Restructured Technology Upgradation Fund Scheme (RTUFS), and the Revised Restructured Technology Upgradation Fund Scheme (RRTUFS). The ATUFS, launched in January 2016, is a credit-linked scheme implemented through designated lending agencies to reimburse subsidy claims on eligible investments.

Although the government increased the allocation compared to last year’s budget, the current budget has received mixed reactions from the industry as they were expecting more from the government.

Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI)

“This budget is extremely pragmatic and innovative in some of the bold decisions and directions it has taken to encourage employment directly. The steps include an internship scheme, the decision to reimburse one month’s wages for new employees, and subsidies for employees earning over a lakh of rupees. These are excellent steps being taken. However, there are many open-ended areas at this point, and we await the details before making specific suggestions.”

K K Lalpuria, CEO and ED, Indo Count Industries

“The Union Budget 2024 is a progressive step towards fostering economic growth and enhancing the competitiveness of Indian industries. The reduction of the corporate tax rate for foreign companies to 35 per cent and the simplification of FDI rules are commendable measures that will attract more international investments, benefiting sectors across the board. For the textile industry, the focus on MSMEs and the emphasis on employment and skilling are particularly noteworthy.”

Rakesh Mehra, Chairman of the Confederation of Indian Textile Industry (CITI)

“After the expiry of the TUFS scheme in March 2022, the industry has no investment incentivisation scheme for expansion or modernization. Scaling up will be critical for the survival of the industry, which has been fast losing out to our competitors largely due to lack of scales. With the exception of enhanced PLI scheme allocation to Rs 450 million from earlier Rs 50 million, there is no major announcement to address the industry’s loosing competitiveness. Viksit Bharat’ would need some more bold steps for the revival of this employment generating sector. We look forward to measures to address these issues.”

Gurudas Aras, Independent Director and Strategic advisor

The budget offers several positive measures for the textile industry, including the  allocation for cotton procurement, the National Technical Textiles Mission, and skill development. A Rs 3000 per month skilling incentive is introduced to address the skill gap. The reduction in customs duty on Spandex yarn will benefit the user industry, while the expansion of trims and embellishments under the Import of Goods at Concessional Rate of Duty (IGCR) will aid apparel exporters. The budget has some disappointments as well. There are no investment incentives for capacity building and modernization, and no scheme to support the textile machinery industry by incentivizing import substitution. The lack of announcements aimed at enhancing the competitiveness of the industry is a missed opportunity. Additionally, the industry was expecting a revised Production Linked Incentive (PLI) for the MSME and apparel sectors, but this did not materialize.”

Sanjay Garg, President, NITMA

“The budget acknowledges the importance of the sericulture industry, which employs millions in rural and semi-urban areas, by increasing the allocation for silk promotion to Rs 9 billion. Furthermore, the proposed reduction in BCD on methylene diphenyl diisocyanate for spandex yarn is a welcome move to rectify duty inversion and enhance production capabilities. The introduction of a new skilling scheme to train 20 lakh youth and upgrade 1,000 ITIs aligns skill development with industry needs, ensuring a steady supply of skilled labour. The comprehensive support for MSMEs, covering financing, regulatory changes, and technology support, is a significant boost for the sector.”

K M Subramanian, President, Tiruppur Exporters Association

“We welcome the Central Budget for the year 2024 – 25 announced in the Parliament by the Nirmala Sitaraman, Minister of Finance, with major emphasis on four thrust targets, namely agriculture, youth, Middle income group and women. Further, we look forward to announcements on import of garments and textiles from Bangladesh, Alternate scheme for TUF, interest subsidy on packing credit loan to exporters, extension of ECLGS etc. soon.”

Rahul Garg, CEO & Founder, Mogilx

“The removal of angel tax is a welcome move for India’s startup ecosystem. This, coupled with the establishment of a Rs 10 billion VC fund for the space economy, will foster innovation. The budget’s focus on manufacturing, with the introduction of plug-and-play industrial parks, is progressive. MSMEs will benefit significantly from the credit guarantee scheme, new assessment models by PSU banks, and increased Mudra loan limits. The substantial allocation of Rs 11 trillion for infrastructure especially nature resilient is crucial for building a Viksit Bharat.”

N Chandran, Chairman, Eastman Exports

“The Budget priorities such as employment and skilling, social justice and manufacturing are a step in the right direction to in pursuit of Viksit Bharat 2047 and the government has rightly renewed its focus on the focus on 4 major pillars: Poor, Women, Youth and Farmer. I genuinely think the Budget holds great promise in terms of addressing the labour and skill shortage, which is the need of the hour for labour intensive sector like textiles.”

Ritesh Khandewal, Founder, ZYOD

“The credit guarantee schemes and mechanisms for facilitating bank credit during stress periods are crucial steps forward. These measures will provide much-needed support, ensuring business continuity and fostering long-term growth. Notably, the ability to secure collateral-free term loans for machinery and equipment empowers MSMEs to invest in innovation and expansion. We are confident these initiatives will contribute significantly to the resurgence of the manufacturing sector”

Amar Nagaram, Founder and CEO, Virgio

“The Finance Minister’s budget theme, with its emphasis on Employment, Skilling, and MSMEs, showcases a forward-thinking approach that is well-suited to the evolving needs of the Manufacturing and D2C industries. This budget, aligned with the Viksit Bharat vision during the Amrit Kaal, introduces several key incentives aimed at boosting job creation and enhancing workforce skills. The special focus on MSMEs will provide critical support for innovation and expansion, facilitating growth across various sectors.”

Akhil Jain, Executive Director, Madame

“The Budget places particular focus on employment, skilling, MSMEs, and the middle class. A provision of Rs 1.48 billion for education, employment and skilling has been made. The incentive of up to Rs 3,000 per month for 2 years towards EPFO contribution for each additional employee will provide financial help to the labour-intensive garment industry.”

Ankit Jaipuria, Founder, ZYOD

“The budget offers a significant opportunity for manufacturing, innovation, and upskilling talent. With a major push to manufacturing-led companies and initiatives to upskill over 2 million youth in the next five years, we expect a major increase in job creation in this sector. The abolition of the angel tax is another positive development towards fostering a robust startup ecosystem that encourages more private investment. “

Vatsal Gaudani, CEO, Vatsal Exports

“The budget also acknowledges the importance of the sericulture industry, which employs millions in rural and semi-urban areas, by increasing the allocation for silk promotion to Rs 9 billion. Furthermore, the proposed reduction in BCD on methylene diphenyl diisocyanate for spandex yarn is a welcome move to rectify duty inversion and enhance production capabilities. The introduction of a new skilling scheme to train 2 million youth and upgrade 1,000 ITIs aligns skill development with industry needs, ensuring a steady supply of skilled labour. The comprehensive support for MSMEs, covering financing, regulatory changes, and technology support, is a significant boost for the sector.”