According to ICRA, Government of India’s latest package for the textile sector is likely to improve the competitiveness of the country's exports but achieving the target of USD 43 billion of apparel exports by 2018 remains a challenge.
The Government approved a Rs 6,000 crore special package for textiles ICRA apparel sector to create one crore new jobs in 3 years, attract investments of USD 11 billion and generate USD 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.
However, achieving the target of USD 43 billion of apparel exports by CY 2018 appear to be a challenge, while the fiscal incentives under the package will improve capacity additions and increase the competitiveness of India's exports.
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 the 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 EPF contribution, according to the report.
Meanwhile, India's garment exports grew at 4 per cent in 2015, whereby they increased to USD 17.1 billion from USD 16.5 billion in the previous year.