FDI flows into the textile sector have been “far from satisfactory” due to factors like lack of trade agreements with key markets, underdeveloped infrastructure and complex labour laws, a study has claimed.
“Despite India offering a large domestic market, competitive labour costs and a well working democracy, its performance in attracting FDI flows has been far from satisfactory,” the study commissioned by the Textile Ministry has observed.
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“The country’s weakness lies in underdeveloped infrastructure and restrictive operative environment and lack of trade agreement with key markets,” it noted.
Pointing out the complex labour laws in the country, the study cited restriction on women from working in night shifts, saying it “creates a lot of problems to garment manufacturers as women constitute majority of the garment workforce”, arguing that the restriction should be removed.
The report highlighted that several large textile and apparel exporting nations like Bangladesh, Vietnam, Turkey, Cambodia, Pakistan have duty advantage in the US and/or EU markets. These countries enjoy duty advantage ranging from 10 per cent to as high as 30 per cent, depending on product and market. This has given them competitive advantage over India in achieving high exports growth rate.
The cumulative FDI in Indian textile sector from 2000-01 to 2014-15 was approximately USD 1.5 billion, the report pointed out.
Africa is the largest investor in Indian textile sector with nearly one-third of the total FDI inflows since 2000-01.
Out of the investment of USD 462 million from Africa, Mauritius accounts for about 99 per cent of investment. Mauritius is ranked as the single largest foreign investor constituting one-third of cumulative FDI investments so far.
Belgium ranks second which is followed by the US and Singapore, having a share of 7 per cent and 6 per cent respectively.
As per consolidated FDI Policy, 100 per cent FDI is allowed in the textile sector under the automatic route.