According to ratings agency ICRA, government’s latest package for the textile sector is likely to improve competitiveness of the country's exports but achieving target of $43 billion of apparel exports by 2018 still remains a challenge. Recently, the Centre approved Rs 6,000 crores special package for textiles and apparel sector to create Rs 1 crore new jobs in three years by attracting investments of $11 billion and generate $30 billion in exports.
These steps will lead to increased competitiveness of India's apparel exports and improve employment generation in the garment sector given its labour intensiveness. While the financial year incentives under the package will improve capacity additions and increase the competitiveness of India's exports, however, achieving the target of $43 billion of apparel exports by 2018 appears to be a challenge, said ICRA Assistant Vice President Anil Gupta.
In ICRA's view, the increased benefit of 25 per cent of capital subsidy under amended Technology Upgradation Fund Scheme (TUFS) for new garment units will further reduce investments requirements for new units by 7.5 per cent.
In addition, the proposal would also benefit new garment units by way of savings of up to 3.7 per cent on labour costs and 1 per cent on total manufacturing cost of apparel due to Government's contribution towards employer's share of Employees Provident Fund contribution, the report said. India's garment exports grew at 4 per cent in 2015, whereby they increased to $17.1 billion from $16.5 billion in the previous year.