Labour and tax policy reforms are needed for apparel and leather sectors as they have immense opportunities for job creation, especially for weaker sections and women, and can become vehicles for broader social transformation in the country, the Economic Survey said today.
The Survey pitched for a free trade agreement with EU and the UK, observing that more FTAs, GST-induced tax rationalisation, and labour law reforms would add considerably to the job creation potential of the clothing and footwear sectors.
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Noting that in both apparel and footwear sectors, tax and tariff policies create ‘distortions’ that impede India gaining export competitiveness, the survey said that there is a need to undertake ‘rationalisation’ of domestic policies which are inconsistent with global demand patterns.
“An FTA with EU and UK will help. In the case of apparels, it will offset an existing disadvantage for India relative to competitors – Bangladesh, Vietnam and Ethiopia which already enjoy better market access.
“In the case of leather, the FTA might give India an advantage relative to competitors. In both cases, the incremental impact would be positive,” as per the 2016-17 report card of the state of the economy tabled by Finance Minister Arun Jaitley in Parliament.
Based on recent inhouse analysis in 2016, it is estimated that an FTA with the EU and the UK can lead to 1,08,029, 23,156, and 14,347 additional direct jobs per annum in the apparel, leather and footwear sectors respectively, said the Survey.
Highlighting that government is taking very seriously the impact of Indian exporters being disadvantaged in foreign markets, the Survey said India will still need to carefully weigh the benefits and costs of negotiating new Free Trade Agreements, such as, with the EU and the UK.
“But in this calculus, the impact on export-and job-creating sectors such as apparels and maybe also leather products compared to other sectors should receive high priority,” it said.
Apparel and leather & footwear sectors are eminently suitable for generating jobs that are formal and productive, providing bang-for-buck in terms of jobs created relative to investment and generating exports and growth, said the Survey.
The Survey noted that India has an opportunity to push exports from apparel and leather sectors since rising wage levels in China have resulted in China stabilising or losing market share in these products, recommending labour and tax reforms to make the country globally competitive.
“India is well positioned to take advantage of China’s deteriorating competitiveness due to lower wage costs in most Indian states,” it pointed out.