The first full term 2015 Financial Budget presented by the Modi Government for the financial year FY-16 is a really disappointing one, especially for the textiles sector. Many of the promises have not been kept and the lackluster budget didn’t allocate much funds to alleviate the woes of the textile industry.
Finance Minister Mr. Arun Jaitley has decided to boost infrastructure projects in this budget, which was a severe blow to the textile manufacturers since they expected some tax cuts in order to obtain a bias-free market. The saddest part is that there was no discernable mention of the Textile industry in the budget.
1. The textile industry is the second most labour-intensive one in the country since it employs over 35 million workers from rural areas who contribute ethnic fabrics and traditional garments to the country currently plagued by western outfits.
2. It contributes over 17% of the country’s annual industrial production figures.
3. The industry was recently included in the ‘Make in India’ program being promoted by the Modi government to boost its feasibility and to give it a better structure in the country. However, with this dismal budget, things look bleak for the industry that faces tough competition from worldwide markets especially China, Pakistan, Bangladesh, Indonesia, Thailand etc.
The Bad Part
1. Allocation for the flagship scheme of TUFS - Technology Upgradation Fund has been drastically reduced from INR 1,864crore to INR 1,520crore for 2015-16 citing procedural and financial crunch.
2. The industry had requested for an allocation of INR 3,500crore for the reimbursements currently pending under the TUFS scheme since FY – 2014 but the demand has been denied.
3. The industry had earlier requested the Finance Minister for a reduction in the duties levied on man-made fibres. But, the demand has been rejected and the duty has rather been hiked. This is a severe blow to fibre manufacturers since they were making serious efforts to diversify into manufacturing manmade fibre-based products in India to in bridge the gap between the global demand and scarce domestic production of good-quality fibre mix.
4. The abrupt hike in service tax to 14% might have an adverse impact on the textile industry if manufacturers tend to increase prices of products or raw materials.
5. Export orientation, which is an integral part of any industry’s growth has also been ignored in this budget.
The Good Part
1. An assurance for speedy implementation of the GST (Goods and Services Tax) has been given and it will come into effect from April 2016.This tax structure will create an unbiased and uniform taxation law that will be applicable across all the states of India.
2. The optional excise duty on ready-made products has been continued which ensures that prices of products will not drop. This is good since prices will remain steady, had the duty been increased the manufacturers would have had to increase their prices, which may cause dwindling of demand in the consumer markets.
If you look carefully at this analysis, the good parts are outnumbered by the bad parts. This is because, the government did not pay heed to the recommendations of textile industry experts who beseeched the Finance Minister to present a fair and just budget this year. Some brilliant propositions like an increase in the duty on imported inputs that are used for export purposes, excise duty should be lowered and a minimum 3% interest subsidy for the sector should definitely be considered.
The government should do its best to fortify the ‘Make in India’ campaign by lowering the service tax in the next fiscal budget otherwise a marginal increase in the service tax would make this high-potential industry unstable and uncompetitive in the global market due to dwindling prices and an unstable Indian economy.
Article Orginally Posted on: Article Base