India eyes tax cuts and incentives to boost textile industry

The Indian government is considering several measures to boost the textile and apparel (T&A) industry, including reducing or removing the basic customs duty on imported organic and long-staple cotton, currently at 10 per cent.

This move could stabilize cotton prices in line with international markets, benefiting an industry that is crucial to India's economy, accounting for 10-11 per cent of total merchandise exports and employing over 45 million people.

The government is also contemplating increasing the customs duty on man-made fibre spun yarn from 5 per cent to 10 per cent and establishing a national textile fund to support technological advancements. These measures aim to support the predominantly small-scale manufacturers in the sector, which consume around 31.6 million bales of cotton annually.

The industry has requested a revised Production Linked Incentive (PLI) scheme with lower investment thresholds and inclusion of cotton products. Additionally, there are calls for the early conclusion of free trade agreements with key global markets and the implementation of an alternative to the Amended Technology Up-gradation Fund Scheme (ATUFS), which has seen low utilization.

These proposals are crucial as the T&A sector faces challenges from global geopolitical uncertainties, low demand in key markets, and fluctuating raw material prices. The upcoming budget decisions are expected to have significant implications for this vital industry.