The Need for New National Textile Policy

July 13, 2017
9 months

What is the issue?

Indian textile sector is undergoing a huge contemporary changes but the last official national textile policy was framed 17 years ago.

How important is textile industry?

  • India’s textile sector has the second-largest employment after agriculture, employing 32 million workers.
  • It has the potential to double this employment in the next seven years as per the vision document (for 2024-25).
  • It is a sector which provides livelihoods to millions of households.
  • It is also a storehouse of traditional skills, heritage, and a carrier of heritage and culture.

What is the reason behind India’s slowdown?

  • India has a rich mix of synthetic and natural fibres and yarns, but still it remains a cotton-focused country.
  • India was finding it profitable to export raw cotton to China because of Chinese government’s support for stockpiling cotton yarn.
  • Also, the presence of cotton in yarn, fibre, fabric and garments is close to 70% of usage within India, which is also reflected in exports.
  • But, the global trend is exactly the opposite, i.e., it has 70% of synthetics and man-made fibres.
  • So, India’s domestic and export mix is the opposite of global fashion and demand trends.

What is the reason behind India’s inverse trend?

  • The inverse skew of fibre usage in India is due to the skewed tax treatment.
  • Until the roll-out of the GST, the cotton value chain was completely free of indirect taxation.
  • Whereas the man-made fibre suffered a dead-weight tax of 12% excise.
  • That anomaly was supposed to be removed by uniform GST.
  • Instead of a fibre-neutral policy, we have a dual GST structure, with 18% GST on upstream, and 5% on all downstream, leaving an inverted duty structure.
  • This has already led to much disruption, as can be seen in shutdowns or strikes in powerloom clusters in Bhiwandi or Coimbatore.

Why there is an urgent need for a policy document?

  • Textiles, along with agriculture, construction and tourism, has large-scale job creation potential.
  • It is a sector dotted with small and medium enterprises, which make up 80% of the units.
  • Thus, it is ideally positioned to be a poster child for ‘Make In India’.
  • This is also a sector which is undergoing a huge change due to automation, digital printing and the relentless rise of e-commerce.
  • These developments threaten to completely change the face of this industry.
  • India’s share of textile exports in total exports (at 12%), is half of what it was in 1996.
  • Bangladesh’s garment exports exceeded India’s in absolute terms back in 2003 and today, it exports twice that of India.
  • Even late starter Vietnam overtook India in 2011.
  • So, to address challenges like changing consumer and fashion trends, modernization of machinery, skill upgradation, a fibre-neutral tax policy and meeting the needs of the e-commerce phenomenon, we need a national policy and implementation plan.


Source: Live Mint

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S.ARUN MAHESH 9 months

"That anomaly was supposed to be removed by uniform GST" as mentioned above,but GST hasn't removed that anomaly, GST rates for MMF fabrics and yarn is fixed at 18% (higher than pre GST - 12%) and 5% GST rate for cotton.... which may not solve the current inverse trend (to that of global trend using 70% synthetic fibre)in the sector that is being faced by it. Am I right sir?