Being competitive in global economy is the only way for $200 billion apparel and textile sector to survive. With the first flush of post-pandemic consumerism on the wane with the Ukraine-Russia war proving to be a huge roadblock to Western economies, India’s major export markets are no longer yielding the profits of past. The government is aware that textile manufacturers across major national hubs have been going through a downturn as pricey cotton forced them cut their production days, affecting cost efficiencies drastically.

In this light, there are positive indications that much-awaited Union Budget 2023-24 will bring a relief to the beleaguered textile sector. The government is expected to improve the textile and apparel sector’s competitiveness for a more restrained Western customer who is now feeling a hard pinch of inflation and recession. As per government reports textile duty adjustments will help make Indian sellers competitive in the Western markets.

Cotton roadblock

From a domestic textile manufacturer’s point of view, expensive Indian cotton is a big cost issue and has affected production lines. Since February 2021, the Indian government had imposed a duty of 11 per cent on imported cotton, which added to the already “too expensive cotton” woes for the textile manufacturers who relied on imports as cheaper alternatives. This financial year experienced peak prices of Rs 1,00,000.00 per candy. This left local manufacturers seek importing cotton despite the 11 per cent duties and imports of ‘Cotton Raw & Waste’ jumped 260 per cent to $1.3 billion between April and November 2022, compared to $361.83 million during the comparable period a year ago.

Atul S Ganatra, President of the Cotton Association of India, in a recent interview with a leading Indian business daily said the government’s 11 per cent import duty on cotton from 2 February 2021 has drastically eroded the competitiveness of value-added products in the international markets, and the Indian textile industry, which is the second largest employment provider in the country, is now constrained to work with only 50 per cent of its installed capacity. The silver lining for India is the projected increase in cotton production locally in the new cotton season in the first quarter of 2023 which will see prices of raw cotton falling to what is considered a more acceptable price.

On the other hand, export of raw cotton material by India may register a decrease due to global demand for the same weakening. The senior government official quoted earlier also opined that “Our thinking is to avoid inverted duty structure in trade and to make sure that if it is necessary to import raw material, the price should not be excessive, which will make our final product uncompetitive." The official also added in his statement to the business daily that “We are also taking steps to boost the production of cotton by implementing newer techniques for efficient farming. Branding activity of Indian varieties of cotton, such as ‘Kasturi cotton’ is also taken up in collaboration with the industry, which will have a long-term positive impact on the industry. Free trade agreements, especially with the EU, UK and Australia, will open up large markets for Indian textile products."

Expectations from the government

Several institutions and associations of the Indian textile sector have made recommendations earlier for discussion during the period of pre-budget decision making. One of the most important decisions is for the government to actively promote the production of extra-long-staple cotton (ELS) as currently India imports between 5,00,000 and 6,00,000 bales of 170 kilo bales of ELS, paying an 11 per cent duty.