Prabhu Dhamodharan offers suggestions to revive the country’s textile and apparel exports
The world trade in textile and apparel is facing its biggest challenge due to COVID-19. Every company and individual may go through the pain in the short term. As for the sector in India, it is facing an unprecedented crisis and loss due to order cancellations, high-cost inventory, and default and delay in payments.
Being a labour-intensive industry, it needs government support to overcome these challenges. At the same time, once the situation gets back to normal, we feel that India has a definite opportunity in the global supply chain due to the changing global dynamics and all advanced economies want to make some realignment in the supply chain across sectors to diversify their sourcing base out of China.
The government and the industry should devise a plan to tap this opportunity in a more strategic way. After the COVID-19 crisis is over, the sector can be a champion in exports and every $1 billion additional exports in textiles and apparel can generate 1.5 lakh new employment.
The Indian industry and policymakers, both at the central and state levels, can devise a new plan to capture the market share. We are confident that the central government will bring in some reforms to unleash the growth opportunities in the sector. We are witnessing a lot of proactive action from their end on long-term reforms. We feel a second financial package will be announced to address the short-term difficulties of the industry.
Here are 12 suggestions to revive the country’s textile and apparel exports:
1. Providing liquidity to all manufacturing companies in this sector:
Extension of moratorium to one year.
Repackaging the moratorium period due as two-year term loan
Twentyfive per cent additional working capital to restart the economic cycle
Allowing textile and apparel companies for one-time restructuring of bank loans to convert working capital loans to long term loans or additional working capital loans
2. Design a new exclusive export incentive scheme for labour-intensive sectors:
Higher percentage of the Remission of Duties or Taxes on Export Products (RODTEP) and other incentives for apparel and home textiles.
- Bringing yarn and fabrics under the RODTEP scheme.
3. Announcing four mega integrated apparel parks with plug-and-play infrastructure with housing facility for workers: It is important to align each park to focus exclusively on a major target market while also bringing foreign direct investment (FDI) and technology support from those countries to the designated parks.
4. Bring bold reforms to unleash the growth of manufacturing sectors: These include power sector reforms (removal of cross- subsidy, etc.), bringing power and fuel under the goods and services tax (GST) regime and labour reforms.
5. New partnerships:
Bring targeted partnerships with untapped markets as part of efforts to diversify from traditional markets.
Focus the cluster’s energy to develop products suitable for the Japanese market. Opena trade office in Japan for textile and apparel, handhold small and medium enterprises in this cluster to connect with buyers and equip them on quality standards of Japan through this approach.
- A few other clusters could align with Russia and the Mercosur region.
6. Free trade agreements (FTAs): During this crisis, India has demonstrated its friendliness with many countries, including the United Kingdom, in multiple ways. The world believes that India would be a more trusted partner in trade. Hence it is time to step up efforts for FTAs, first by signing one with the United Kingdom. This single FTA can create five lakh new jobs in the sector.
7. Digital platform/branding: Global business was already operating in digital mode and this further increased during the novel coronavirus crisis. We need to brand Indian textiles in a big way by creating a single digital platform to connect with international buyers and popularise it to showcase the uniqueness and capabilities of the sector with the theme ‘India for SURE’, with SURE standing for Stable sUstainable Reliable Ethical.
8. Exclusive trade offices in embassies: like South Korea; we can establish trade offices in embassies to help three top labour-intensive sectors in export opportunities.
9. Payment systems: Crises are generally opportune times to combat legacy issues. Indian textile and apparel exports need to introduce some uniform payment systems instead of the current credit system that operates without any guarantee on payments.
10. GST/Import duties: Rationalising of import duties in the man-made fibre (MMF) value chain for various products and addressing the GST inverted duty structure in MMF products.
11. A national mission for MMF apparel manufacturing sector’s growth.
12. A national mission for enhancing productivity levels in major apparel clusters.