The NDA government’s announcement of a special package, worth Rs 6,000 crore, for the textiles and apparel sector is welcome. The government hopes to create one crore new jobs in three years and attract investments of $11 billion, while generating $30 billion in exports. It is hard to say how many of these targets will be met yet the measures are a step in the right direction. Trouble is, however, that most of what is being done today may be almost two decades too late. The story of the Indian textiles industry is one where a whole generation’s well-being was compromised through misguided policy. In the misplaced bid to retain the small-scale character of traditional handlooms, Indian policymakers ruled out fast domestic industrial expansion — all garments, they mandated, must remain within the so-called small scale sector. So as the world, and especially India’s competitors such as China, Vietnam, and later on Bangladesh, built up massive capacities to meet global demand, India was stuck with debilitating rules and regulations. By 2005, when trade quotas were relaxed, India was in no shape to take advantage of freer trading norms. It is no surprise then that as against India’s share of 3.1 per cent in the global garment industry, China’s is around 35 per cent and even Bangladesh has 60 per cent more share than India.
The package announced on Wednesday does away with a lot of red tape to reduce costs, both in terms of time and money, and would enable Indian manufacturers to improve competitiveness. Enabling measures include additional incentives for duty drawback schemes for garments, flexibility in labour laws to increase productivity as well as tax and production incentives for job creation in garment manufacturing. There are changes which allow those earning less than Rs 15,000 to forgo the employees provident fund. This would leave people with more disposable income. Further, to bring down the costs for businesses, the government has also pitched in to pay the employer’s contribution to the EPF in other cases.
While these measures will help, far more needs to be done if India wants to corner a large part of the market share that China may relinquish. China, like most countries before it such as Japan or Korea, has reached a stage where factor costs have increased and this is forcing it to opt for more technology-intensive methods. India, with labour costs still low, has a decade in hand, at best. India must quickly improve its infrastructure — ports, roads, electricity — to ensure that these new measures come to fruition.