India’s textile industry must focus on capitalising on the shifting global supply chain landscape, driven by the ongoing political crisis in Bangladesh. With global retailers scrambling to find alternative suppliers amidst the ongoing crisis in Bangladesh, industry stakeholders and experts urge the Indian government to introduce significant budget reforms to revitalise the country’s textile sector. To achieve this, they advocate for several key measures, including reducing import duties, simplifying import procedures, interest subsidies and tax incentives.
“Indian domestic raw material prices are significantly higher than international prices. While competitors like Bangladesh, and Vietnam have free access to such raw materials, India has imposed QCO on MMF fibre/yarn, which is acting as a Non-Tariff Barrier on the imports of such raw materials and thus affecting their free flow. It has resulted in a shortage of some specialized fibre or yarn varieties which has also affected domestic prices,” says Rakesh Mehra, Chairman, Confederation of Indian Textile Industry (CITI).
CITI expects the government to ensure availability of raw materials at international competitive prices.
CITI advocated for income tax relief for MSME manufacturing units within the textile sector. The government may remove BCD from all cotton varieties to ensure the availability of cotton at internationally competitive prices, the organisation said. The stakeholders also said that the government through Cotton Corporation of India (CCI) may ensure enough availability of cotton at international prices (when domestic prices rule higher than international prices) and any loss to CCI in this regard may be compensated by the government in the form of a subsidy, the way government is providing for other commodities.
For context, India’s textile and apparel industry is facing significant headwinds because of sluggish global and domestic demand. India’s textile sector employs about 45 million people.
“This is a watershed moment, when India is aspiring to capture a higher share in global imports of apparels owing to the enhanced trust that global brands are placing on India. This is the opportune time for the country to leverage it in terms of export growth, as reputed global buyers or retailers or chain stores are looking for alternatives because of China plus one factor and the Bangladesh crisis,” says Sudhir Sekhri, Chairman, Apparel Export Promotion Council (AEPC). The AEPC budget demands are also driven by the ongoing political crisis in Bangladesh, which has prompted global retailers to diversify their supply chains and seek alternative suppliers, presenting an opportunity for India’s textile industry to fill the gap.
The AEPC has outlined its key demands for the upcoming budget to boost the growth of India’s apparel export sector and the major demands include continuation of interest equalisation scheme, removal of Sec 43B (H) of IT Act, simplification of imports of trims and embellishments under IGCR (Import of Goods at Concessional Rate) procedure, exemption of customs duty on imports of garmenting machinery, and Green Transformation Scheme for upgrading ESG infrastructure.
Focus on exports
Vikas Singh Chauhan, Director, Home Textile Exporters Welfare Association (HEWA), urged the government to extend the Rebate of State and Central Taxes and Levies (RoSCTL) benefits for home textile exporters from the current average of 6-8 per cent to at least 10 per cent , ensuring competitiveness with countries like Bangladesh and Vietnam and extend RoSCTL on entire value chain of textiles, promoting value addition.
Chauhan also called for an introduction of special export subsidies on logistics to offset increased freight cost of 20-30 per cent post pandemic create logistics scheme to offset the same. “The government can extend the Interest Subvention scheme to both merchant exporter and manufacturer exporter for a minimum of 5 years and from 2 per cent to 5 per cent . as borrowing rates are very high. Also, the government can declare 2025 as an export year to promote and focus exports specially from ground level and to motivate youth to start their career in the export field,” noted Chauhan.
The stakeholders and experts also called for a simplified tax regime for MSMEs and a 5 per cent GST rate across the textile value chain like synthetic yarn (currently taxed at 12 per cent ) and finished home textile goods (18 per cent ) to 5 per cent ), creating cost parity with international competitors.
Chauhan said that the government can also expand the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) coverage from the current Rs 2 crore limit to Rs 5 crore, enabling higher capital availability for MSME exporters.
Boosting overall competitiveness
Ravi Gupta, Creative Director at Gargee Designers, emphasised the need to liberalize e-commerce export procedures to facilitate smoother access to international markets. He recommended two key reforms: increasing the ceiling per consignment to at least Rs 25 lakh and extending the export realisation period to 12 months These changes would enable enterprises to operate more efficiently, expand their global reach, and capitalize on emerging export opportunities, said Gupta.
Gupta further suggested that extending the Production-Linked Incentive (PLI) scheme to small and medium-sized textile companies can have a transformative impact. This inclusion can significantly boost production capacity, attract investments, and promote the adoption of modern manufacturing technologies, ultimately driving growth and competitiveness in the sector.
“In order to support the complete value chain from production to retail, it is possible to close structural gaps, increase consumption, and facilitate company operations by expediting the National Retail Policy’s implementation,” said Gupta.
Ishant Gupta, Partner, NPV & Associates LLP, emphasised the need for the industry to focus on two key areas: skill development of workers and technology upgradation. “Through targeted skill development programs and support for MSMEs, we aim to upskill workers and empower small enterprises to scale up production. Modernization support is crucial, with initiatives like technology upgradation schemes and R&D investments in innovative textiles driving the sector forward,” says Ishant Gupta.
To further bolster cost competitiveness, Ishant Gupta suggests that energy subsidies, streamlined trade processes, and enhanced access to raw materials are essential.
Similarly, Ashish Karundia, Founder, Ashish Karundia & Co, bats for removal of the Quality Control Order (‘QCO’) on Man Made Fibres (‘MMF’) and yarn. “It would facilitate a free flow of these raw materials at competitive prices, especially in comparison to countries like Bangladesh and Vietnam. Furthermore, abolishing the customs duty on all types of cotton fibers would provide a boost to the textile sector. Additionally, India’s garment export sector relies heavily on imported machinery for quality and competitiveness. Removing customs duties on such machinery would further enhance exports,” adds Karundia.
