Budget 2025: India’s textile industry eyes export growth and competitiveness
The Indian textile industry, a cornerstone of the economy and a major employment generator, has outlined its expectations for the Union Budget2025-26. Key themes emerging from industry associations like the Confederation of Indian Textile Industry (CITI), the Cotton Association of India (CAI), Texprocil, and various stakeholders include boosting exports, addressing raw material price disparities, supporting MSMEs, and fostering technological advancement.
Raw material availability and pricing
A primary concern is the higher cost of domestic raw materials compared to international prices. CITI has been vocal about this issue, stating in its pre-budget memorandum, "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...resulting in a shortage of some specialized fibre/yarn varieties and impacting domestic prices." This price difference significantly impacts the competitiveness of Indian textile products in the global market.
CITI chairman Rakesh Mehra reiterated this point, stating that "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."
The industry demands the removal of import duties on all cotton varieties to ensure availability at competitive prices. The pre-budget memorandum argues that the existing import duty "is not serving its intended purpose, rather hurting the domestic cotton textile value chain."
Cotton price volatility and procurement
The CAI and other stakeholders have emphasized the need for measures to stabilize cotton prices. The pre-budget memorandum proposes a Cotton Price Stabilization Fund Scheme, including:
- 5 per cent interest subvention or loans at NABARD interest rates.
- Increasing the credit limit period from three to eight months.
- Reducing the margin money for cotton working capital from 25 to 10 per cent.
The memorandum also suggests a shift to a Direct Benefit Transfer (DBT) system for cotton procurement under the Minimum Support Price (MSP), enabling farmers to sell in the open market and receive the difference via DBT if market prices fall below MSP.
Technology upgradation and PLI scheme
The industry recognizes the need for technological advancement to remain competitive. The pre-budget memorandum calls for a ‘Technology Mission on Cotton – II (TMC II)’ focusing on:
- Advanced seed technology.
- Global best practices for cultivation and processing.
- Clean cotton initiatives.
- Branding of Kasturi cotton.
Furthermore, the industry seeks an alternate scheme to the phased-out Technology Upgradation Fund Scheme (TUFS), specifically targeting MSMEs in weaving, knitting, processing, and garmenting. This proposed scheme would offer a mix of upfront capital subsidies and performance-based incentives.
While acknowledging the existing PLI scheme, the industry advocates for a new version with lower investment thresholds and wider product coverage to benefit a larger segment of the industry.
Export promotion and competitiveness
Recognizing the opportunity presented by the shifting global supply chains, particularly the situation in Bangladesh, the industry is pushing for measures to boost exports. Sudhir Sekhri, Chairman of the Apparel Export Promotion Council (AEPC), stated, "This is a watershed moment...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."
The AEPC's key demands include
- Continuation of the Interest Equalization Scheme.
- Removal of Section 43B(H) of the IT Act.
- Simplification of import procedures for trims and embellishments.
- Exemption of customs duty on imports of garmenting machinery.
- A Green Transformation Scheme for upgrading ESG infrastructure.
Other export-focused recommendations include extending the RoSCTL benefits for home textile exporters, introducing special export subsidies on logistics, and simplifying e-commerce export procedures.
MSME support
The industry emphasizes the crucial role of MSMEs and calls for enhanced support, including simplified tax regimes, increased CGTMSE coverage, and categorization of MSMEs as secured creditors to improve payment recovery.
Thus the Indian textile industry's Budget expectations center on creating a more competitive and export-oriented environment. Addressing raw material pricing, supporting MSMEs, promoting technology upgradation, and implementing targeted export promotion measures are crucial for the industry to achieve its ambitious growth targets and capitalize on global opportunities. The Budgetwill be a key indicator of the government's commitment to supporting this vital sector.