The Centre’s package of incentives to boost investments and job creation in the export-oriented textile and apparel sector is a stitch in time. That one of the economy’s largest employment generators outside agriculture has been steadily ceding ground to smaller but nimbler competitors such as Bangladesh and Vietnam has been a matter of concern for industry and policymakers alike. The measures, aimed at streamlining labour norms and offering tax breaks, will give a big fillip to domestic garment-makers as they vie with producers in South and Southeast Asia to gain a larger share of the U.S. and European Union markets. As the World Bank report, ‘Stitches to Riches?’, noted in April 2016, the potential decrease in Chinese apparel exports — as wage costs in that country rise and manufacturing investments move up the value chain into high-technology industries — presents a huge opportunity for South Asian countries. The government’s action will help tap this opportunity. Of the Rs.6,000 crore earmarked for the package, Rs.5,500 crore is set apart for providing an additional 5 per cent duty drawback for garments. Apparel-makers can now avail refunds on state levies paid by them as part of this benefit, a long-pending demand. The other announcement with an upfront fiscal implication is the Rs.500 crore pencilled against additional incentives under the Amended Technology Upgradation Funds Scheme. Specifically, the subsidy provided to garment units has been increased to a healthy 25 per cent from 15 per cent. This should boost employment generation.
Cognizant of the fact that leading international brands now insist on their outsourced value chains being compliant with global labour standards, the Centre has aligned overtime norms for workers with the ILO’s weekly limit of eight hours. To address the seasonal nature of the workflow, the Ministry has introduced the concept of fixed-term employment for the garment industry: a worker hired for a fixed term will be treated on a par with a permanent employee and will be eligible for all statutory dues. As a result of the sops, the apparel and textile industry is expected to add one crore jobs over the next three years. This ambitious goal will become achievable if the projected investments of Rs.74,000 crore flow in. Apparel exporters in Vietnam will gain substantial tariff advantages and market access as part of the Trans-Pacific Partnership deal to which it is a signatory. Bangladesh continues to enjoy a raft of preferential tariffs and access benefits given its status as one of the Least Developed Countries. Given this, the measures to bolster India’s textile industry have come just in time.
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