The last Union Budget before the next general election in 2024 has got a mixed reaction from India’s textile and apparel industry. The Finance Minister Nirmala Sitharaman’s focus on infrastructure, investment, green growth, youth power and inclusive development has got a thumbs-up from across the industry. Also, the income tax incentives has also gone down well with expectation of more cash for spending among the consuming class.

Boost to ELS cotton

“The government will focus on enhancing cotton crop productivity by adopting a cluster-based approach with a public-private partnership model and enhanced use of advanced technologies,” said Sitharaman in her Budget speech. The emphasis to increase cotton crop productivity will be positive cotton textile stocks. With this announcement these stocks rallied up to 3 per cent in morning deals on NSE.

Reacting to the Budget Ravi Sam, Chairman, Southern India Mills’ Association (SIMA) thanked the government for giving thrust towards inclusive growth, infrastructure and investment green growth, skills development, etc, that would greatly help the highly labour, power and capital intensive textile industry. He also thanked the government for considering the Association’s proposal and announcing a scheme for increasing production of Extra Long Staple (ELS) cotton under Cluster Development Initiative through PPP mode. As per Ravi Sam, SIMA can match with international ELS cotton varieties and would take initiatives to increase production under the scheme. He says after introduction of Bt technology only for Long Staple Cotton, the industry started facing shortage of ELS cotton. The industry’s requirement of ELS cotton is around 20 lakh bales while the country produces only five lakh bales and depends on imports of superior quality ELS cotton. This initiative will benefit the whole textile value chain including cotton farmers.

“The focus on enhancing the yield of Extra Long Staple (ELS) cotton, a long requirement of textile industry, will help to increase manufacturing of value added garments and also to reduce the import of ELS Cotton,” said KM Subramanian, President, Tiruppur Exporters’ Association (TEA).

The emphasis to increase cotton crop productivity will be positive for cotton textile stocks. At the bourses, these stocks rallied up to 3 per cent in morning deals on NSE. HP Cotton Textile Mills, one of the largest exporters of cotton specialty yarns and cotton sewing threads in India, rallied 3.19 per cent to Rs 103.65.

Focus on Green Growth

Green growth will be one of the seven priority sectors of Union Budget 2023. In her Budget speech, she explained that “green growth” priority sector will include multiple programmes on green fuel, green energy, green farming, green mobility, green buildings and green equipment. This will also include policies for efficient use of energy across various sectors. “These green growth efforts will help in reducing carbon intensity of the economy and provides for large scale green job opportunities,” she said.

Naren Goenka, Chairman, AEPC feels the Budget is a positive, growth oriented and forward-looking one. “The focus on infrastructure, investment, green growth, youth power and inclusive development will boost India’s journey to be the fastest growing- robust economy. The announcement to cover more sectors under the PLI scheme and support to the MSME sector will help thrust exports and investment in the country,” he added.

Goenka says the Rs 9,000-crore corpus for a revamped credit guarantee scheme will alleviate the stress of small and medium enterprises in India. As desired by exporters, the increased allocation for Interest Equalization Scheme from Rs 2,376 crore in 2022-23 to Rs 2932 crore in 2023-24, up 23 per cent, will support exports. Further he says, “The increased allocation of ATUFS from 650 crore in 2022-23 to Rs 900 crore in 2023-24 an increase of 38 per cent will help in release payment of pending cases faster.” Further Chairman AEPC observed, by removing a large number of compliances converting over 3400 legal provisions into decriminalization and amending 42 Central Acts will help smooth revival of businesses.

Unhappy about increase in customs duty for textile machinery

Ravi Sam pointed out the government could have avoided the increase in basic customs duty on textile machinery from 5 to 7.5 per cent as the country is not even producing 20 per cent of the machinery requirement. This will impact global competitiveness and also the recently announced Production Linked Incentive Scheme and PM MITRA Scheme in the absence of Technology Upgradation Fund Scheme which was in vogue from April 1 1999 to March 31, 2022.

Subramanian concurs, “Unfortunately, there was no announcement on continuance of ATUF Scheme in the Union Budget.”

Commenting on the Budget Sanjay K Jain, MD TT Ltd & Chairman ICC National Textiles Committee says, “As expected nothing really for textile industry in this Budget.” He is excepting more disposable income in consumer’s hands due to tax cuts plus with inflation taming which means more consumption.”

Mayank Tiwari, Founder and CEO, ReshaMandi, says “The government’s decision to relax taxation for start-ups for up to 10 years, coupled with the setting up of bio hubs in rural areas, will greatly ease the process of setting up units in villages. Our efforts to improve the supply-chain network for all our stakeholders in the natural fibre ecosystem supply chain receives a major boost from the decision to support collaborative projects between farmers, states, and businesses to provide input supply extension services and market connections. Besides providing direct access to global markets, ready access to the internet will expose the farming community to the best trade and agricultural practices the world over. Promise of financial assistance to traditional artisans such as weavers, who are ReshaMandi’ s strategic stakeholders and partners, is a decision we welcome with much delight.”