What Does Union Budget 2022 Hold For Textile Industry With Influx of 105 Crores?

Last month, the Union Budget for the 2022-2023 Financial Year (FY) was announced. The budget had significant points of interest – and for the Indian textile industry, the allocation of Rs. 105 crores for the Raw Material Supply Scheme (for FY23) is a big boost. There has also been an increase of 8.1% in overall textile sector allocation, which is likely to help the Cotton Corporation of India (CCI) to have more funds for purchasing cotton. Let us here take a look at what this year’s Union Budget holds for the textile sector, including the top spinning can manufacturers of the country:

Availability Of Credit For MSMEs

For MSMEs in particular, and the textile industry in general, this year’s budget has indeed been a ‘people-friendly and progressive’ one. Well over 130 lakh MSMEs across the country are expected to have access to the credit/funds they require – thanks to the Emergency Credit Line Guarantee Scheme (or, ECLGS). For mills, manufacturing units and spinning can manufacturers still reeling from the pandemic-induced downturns, this is indeed a welcome piece of news.

The changes in capital allocations announced in the Union Budget will also have a positive impact on the domestic textile & yarn-making sector. For starters, the PM MITRA scheme and the PLI scheme have been allotted Rs. 15 crores each, while the Textile Cluster Development Scheme will receive Rs. 133.83 crores. Even more impactful would be the Rs. 17683 crores allotted to the CCI (Cotton Corporation of India) for cotton procurement under minimum support price.

Restoration Of The Import-Export Balance

Duty exemptions on capital goods in several sectors (like textiles, food processing, power, fertilizers, and more) – some of them in existence for decades – have stunted the development of the domestic industry in many cases. The Union Budget 2022-23 has addressed this, through the placement of concessional rates on project imports and select capital goods. The tariff rate has been fixed at 7.5%.These steps should go a long way in strengthening textile exports and revenue-generation.

The Union Budget has also paved the way for the Indian states to emerge as ‘Development of Enterprise & Service Hubs.’ For this, a fresh legislation has been introduced, to replace the Special Economic Zones Act. This move will help textile industries (both the existing and the new ones) to ensure optimal resource utilisation and productivity enhancement. Going forward, domestic exports are expected to become much more competitive than before. The import duty changes, in particular, have been hailed by the Clothing Manufacturers Association of India (CMAI).

Announcement Of Beneficial Tax Schemes

The textile industry has been demanding favourable tax schemes for some time now. This year’s Union Budget has some great news in this regard. The import of several accessories and trim have been brought under customs duty exemptions, while the import duties for the fabrics that can be manufactured domestically have been raised. In addition, the overall budget allocation has been done in a way that facilitates significant new investments in the textile sector. The volume of this additional investment should be around the Rs. 19000 crores mark.

The ‘review of exemptions’, as announced by Finance Minister Nirmala Sitharaman, is widely being viewed as significant by textile companies and top spinning can manufacturer companies in India. This review will be focused on the simplification of the overall structure of tariffs and customs rates of several sectors (including, of course, the textile industry). For some garments and fabric products, the specific duty and the ad valorem taxes will be rationalised.

Rise & Rise Of Employment Opportunities

The announcement of Rs. 105 crores for the Raw Material Supply Scheme is being widely expected to be really beneficial for generating fresh employment opportunities. With the new set of allotments projected to bring forth more than Rs. 3 lakh crores of turnover, around 7.5 lakh new jobs will be created in the domestic textile sector. The PLI schemes for all the 14 sectors, taken together, will generate more than 60 lakh employment opportunities.

Broadly speaking, the Union Budget has successfully addressed several lingering issues related to raw materials, taxes, employment scopes, and others. This, in turn, should make the Indian textile & yarn industry highly competitive. As production scales increase, demand levels soar, and more & more jobs are created, India should be well on its way towards becoming a global textile superpower.

Use Of Technology & Ease Of Doing Business

The move of the GOI to encourage the implementation of advanced technology for assessing cotton crops has been appreciated by textile manufacturers, machinery producers and spinning can manufacturers. In the Union Budget, Rs. 100 crores have been allotted for the National Technical Textiles Mission. The concessional customs duty has been levied for different types of machinery – including those for weaving and knitting.

One of the key highlights of this year’s Union Budget has been the announcement of ‘Ease Of Doing Business 2.0’. This is expected to bolster the position of the Indian Texpreneurs Federation in a big way. The reformatory measures in the customs administration and management of SEZs are also geared to have a positive impact on the textile sector. With the administration becoming increasingly IT-powered, credit facilitations will be enhanced (along with risk-based checks).

From widening the scope for medium and small-scale enterprises (MSMEs) and incentivising exports, to the development of Special Economic Zones (SEZs) and improvement of employment opportunities – the Indian Government, through this year’s Union Budget, has reiterated its commitment towards taking the national textile sector to the next level. With the rising productivity and soaring demands in this industry, top spinning can manufacturer companies are also expected to benefit. These are exciting times for everyone involved in textile & yarn production – and we’ll have to wait and see how the announcements made in the Union Budget actually pan out in the foreseeable future.