Business Today

Textiles - Caught in knots

The Indian Textiles sector has been particularly affected by the rupee appreciation, which has marred the government’s export target of $25 billion (Rs 1,00,000 crore) during 2007-08.

     Print Edition: Budget 2008 Special

Textile Industry
Textile Industry
The Indian Textiles sector has been particularly affected by the rupee appreciation, which has marred the government’s export target of $25 billion (Rs 1,00,000 crore) during 2007-08.

Total textile exports during April-December 2007 were down 14 per cent at $4 billion (Rs 16,000 crore) against $4.6 billion (Rs 18,400 crore) during the same period in 2006.

Garment exporters are also facing tough competition from China, Bangladesh, Sri Lanka and Indonesia.

However, Indian exports to the US in value terms registered a growth of 2.9 per cent during April-September 2007, as against 21.9 per cent by China during the same period.

The textiles sector, which is the largest employer after agriculture, saw large-scale job losses. To strengthen the industry, the government has taken several measures like an increase in duty entitlement passbook and duty drawbacks rates, exemption from services tax on select services and reduction in interest rates of pre-and post-shipment credit.

But all these haven’t stopped textile firms from buying global brands— Welspun India bought a 76 per cent stake in Portuguese bath rugmaker Sorema, and Himatsingka Seide bought three foreign firms this year.

 Corporate impact

  •  

    Rajinder Gupta, Chief Executive Officer, Trident Group

    “It is the right time for the industry to take initiatives than depend on the government for help. It should focus on introducing better technologies to become globally competitive”

    Rajinder Gupta
    Orient Craft: Increased allocation for TUFS is likely to benefit the company already reeling under the pressure of rising rupee and fierce competition from the neighbouring countries like Bangladesh and Sri Lanka

  • Century Enka: Being a major synthetic yarn player, the company was expecting a rationalisation of duty to 4 per cent to bring it on par with cotton textiles. The Budget, however, was silent on this

  • Arvind Mills: The sharp rupee appreciation has forced the company to re-draw its export strategy. It plans to focus purely on branded products—no push from the Finance Minister even on this front

  • Bombay Dyeing: Its business is evenly split between domestic sales and the export market. Thus, the Budget announcements will have a neutral impact on it

Sectoral impact

  • Imports as well as manufacturing costs of polyester filament yarn will reduce due to removal of 1 per cent National Calamity Contingent Duty

  • Excise duty benefits for Small-Scale Industry have also been extended to plastic strips used within factory for weaving of fabrics or for manufacture of sacks or bags made of polymers of ethylene or propylene

  • Import cost of polyester tyre cord fabric will reduce by more than 5 per cent due to the cut in basic customs duty

  • Shuttleless looms would now become costlier due to the withdrawal of excise duty exemption

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