Investments in the Indian textile industry have shown a major increase in recent months. According to the latest data, the slated dismantling of the quota system in the global textile trade under the multi-fibre agreement (MFA) beginning January 2005 has brought a fresh wave of confidence in the industry. Investments have picked up in all segments, including processing and weaving — weak links in the domestic textile value chain.While big corpoate houses have stepped up investment, they have also increased their exposure to the technology upgradation fund scheme (TUFS). An upfront capital subsidy scheme for the modernisation of the decentralised powerloom sector has led to the installation of a large number of new shuttleless looms.Sanctions under TUFS rose from Rs 630 crore in 2001-02 to Rs 837 crore in 2002-03 and further to Rs 1,341 crore in 2003-04. Since the scheme began in 1999, the total project cost of TUFS investments has stood at Rs 25,000 crore, of which nearly Rs 10,000 crore was loans sanctioned under the subsidy scheme. Until October ’03, the figure was Rs 18,467 crore, of which loans amounting to Rs 8,505 crore carry the subsidised interest rate.While global retail chains like WalMart, JC Penney, GAP etc have already stepped up outsourcing of garments to India, the quality of Indian fabric continues to be a major concern for them. Shade consistency is absent in the Indian garments, which are superior in terms of design. The focus on new processing technologies is crucial for the industry, as it braces up for the quota-free regime.The biggest increase in investment has, therefore, been in the processing and composite segments. About 438 processing units have planned an investment of Rs 2,721.73 crore. TUFS has so far sanctioned Rs 1,045.92 crore to 385 processing units. The restructuring of the tax regime for the textile sector carried out in the last two budgets has not only introduced a level-playing field, but also substantially lowered the tax burden on the industry. A debt restructuring scheme is also under implementation. However, the ECB route for financing the scheme is reportedly unfeasible and the scheme has not yet gathered momentum as desired.
