VOL. XLVII No. 6 MUMBAI, TUESDAY, JANUARY 10, 2017 PRICE: Rs. 5.00

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2016: A Dynamic Journey to Year 2017By Mukesh Goel, Senior Consultant, Wazir Advisors

Globally, textile industry has gone through various crests andtroughs in the recent past. Be it sluggishdemand in the majormarkets like USA and EU or attempt of major markets to get theircommand back on the textile and apparel trade by favoring regionaltrade pacts, textile industry has remained in the headlines of the

under Pradhan MantriRozgarProtsahanYojana (PMRPY) and3.67% under Pradhan MantriParidhanRozgarProtsahanYojana(PMPRPY)) for new employees for first 3 years earning less thanRs. 15,000 per month.

* EPF shall be made optional for employees earning less thanRs. 15,000 per month.

b. Increasing Overtime Caps: Increase in overtime hours forworkers from 50 hrs to 100 hrs per quarter in line with ILO norms.

c. Additional Incentives UnderATUFS: Investment subsidyunder Amended-TUFS increased from 15% to 25% with value caprevised to Rs 50 crores.

d. Enhanced Duty Drawback Coverage: Duty Drawback hasbeen revised to reimburse state levies which were not covered in

5. Other Major TextileSector Specific Events:With aview toboost textilemanufacturing in thecountry,Amended TechnologyUpgradation Fund Scheme(ATUFS) was launched inJanuary 2016 and Basic CustomsDuty on certain specialty fibreand yarns was reduced from 5%to 2.5%.

Various export promotion

Year 2016.Indian textile industry has

also remained a front runnerwith various dynamics involvedduring the Year 2016. On onehand, slowing down of exportsand demonetization negativelyaffected the Indian textileindustry while on the other handGovernment has come forwardwith a bounty of incentives tohelp industry cope up decreasing

competitiveness in the global markets.As we enter year 2017, letus recap various developments round the globe during the Year2016 which effected or will potentially effect the Indian textileIndustry.

1. Britain’s exit (Brexit) from EU: On 23rd June 2016,Britain passed a referendum for its exit from EU. Britain being amajor consumption center in EU, imports variety of textile andapparel products across globe which is growing by 1.2% since 2010.Its textile and apparel imports stood at US$ 35 billion in 2015which primarily constitutes apparel (85%). The referendum fallflat on the countries like Turkey and Bangladesh having preferentialmarket access to EU which will not remain applicable anymore foraccessing the UK market. This move will also hurt Vietnam’saspiration to get a majority share in EU’s textile and apparel importfrom EU-Vietnam Free Trade Agreement (FTA) which will

positively come into effect by2017.

However for India, Brexitprovides an opportunity toincrease its textile and apparelexports to Britain in medium tolong term by signing a FTA.India and EU have beendiscussing FTA since 2007 andtill now it is nowhere near toconclusion. With Britain’s exitfrom EU in next few years, it will

the previous Drawback rates.Further to the above

incentives given to both appareland made-ups industries, fixedterm employment and AIRDrawback facility when fabric isimported under AdvanceAuthorization Scheme were alsoextended to apparelmanufacturers and exporters dueto the seasonal nature of thisindustry.

initiatives like upward revision of duty drawback rates andincreasing coverage under MEIS were also taken by theGovernment.Indian Government also succeeded in getting GSPstatus from EU on apparel exports till 2019 which will restore ourcompetitiveness in EU market.

DYNAMISM IS THE ONLY CONSTANT IN THEGLOBALIZEDWORLD. Indian textile industry being globalizedand export oriented is expected to face challenges from globaldynamics. Year 2016 proved a differentiator year when Governmentcame forward to hand hold industry by giving cognizance to theindustry’s issues and acting accordingly. But to emerge as a globaltextile leader,“Responsive” actions need to be replaced with“Proactive” measures.

gain autonomy on its trade decisions which may be envisaged as apotential trade pact with India.

2. Trade Agreements Changing Landscape of GlobalTextile Value Chain: Out of various discussions held on free/ multi/regional trade agreements in 2016, Trans Pacific Partnership (TPP)and EU-Vietnam FTA remained most crucial from textile industry’spoint of view.

These agreements are expected to redesignglobal textile valuechain in favor of Vietnam and reduce autonomy of China on textiletrade.In order to counter balance this move, countries includingIndia are creating a new regional trade boundary by discussingRegional Comprehensive Economic Partnership (RCEP). Globaltextile landscape shall get a complete make over after the conclusionof these trade agreements.

3. Revival of Major Markets: Till the recent past, growthin major textile and apparel markets i.e. US and EU remainedsluggish due to Global Financial crisis and Euro Zone crisisrespectively. Slowing down of US and EU economies negativelyimpacted apparel consumption in these markets giving set back totextile manufacturing countries including India.

However in 2016, GDP of US and EU grew by 1.6% and1.9% respectively giving a push to the apparel consumption. Asper IMF estimates, it is expected that growth in these markets willcontinue in near future which will further boost apparelconsumption.

4. Special Package for Apparel and Made-ups: Though,India has a well-established textile and apparel industry making itthe second largest exporter of textile and apparel in the world butit is facing stiff challenge from the countries like Bangladesh,Vietnam, Pakistan, etc. This is primarily due to the preferentialaccess i.e. Everything But Arms (EBA) status to Bangladesh, GSP+status to Pakistan in EU market and large scale capacity expansionof Vietnam’s textile industry.

Thus, in order to restore the competitiveness of Indian textileand apparel products in global markets, Indian Government on22nd June and 7th December 2016 had announced specialincentives of worth Rs 6,000 corers for the exporters of appareland made-ups from the country. These incentives include:

a. Employee Provident Fund Scheme Reforms* Govt. of India shall bear entire 12% of the employers’

contribution of the Employers Provident Fund Scheme (8.33%