Textile sector to get Rs 6000-cr package

In a bid to improve the share in the global textile market Finance Minister Arun Jaitley announced on Wednesday a package of Rs 6000 crore with a hope of creating 1 crore new jobs in three years, which may attract Rs 74,000 crore in investments and generate over $30 billion in export earnings. 

While announcing the package Arun Jaitley expressed confidence that the package will help in realising the true potential of employment generation in the textile and apparel sector. 

The package will provide more flexible labour laws and financial incentives to the sector, triggering positive sentiment in the sector. The package is introduced with an aim to make the industry competitive in terms of costs and bring in the economies of scale which in turn will help grab a larger pie of the global market.

India faces competition not only from China but also from Vietnam and Bangladesh. With key policies being supportive to the sector , India could overtake Vietnam and Bangladesh over a three year period. Currently the textile and apparels' exports stand at $40 billion. 

While welcoming the move, industry experts believe the flexibility in labour laws will benefit the garment sector immensely. Under the new arrangement, the government has proposed to sponsor the entire 12 per cent of employer's contribution under the Employers Provident Fund Scheme  for new hires by the industry with earnings less than Rs 15000 a month for the first three years.

Before this 8.33 per cent share was borne by the government under the Pradhan Mantri Rozgar Protsahan Yojana (PMRPY).With the entire share taken up by the Government the industry is expected to benefit up to Rs 1,170 crore over next three years.  Also, provident fund contribution is expected to be optional with the new policy in place. With this measure the cash in hand component for the workers will improve and make it attractive for workers to opt working in the sector. 

On the financial incentives front the subsidy under the Amended-TUFS is raised to 25 per cent from 15 per cent subject to expected jobs being created. To further make the industry stronger, a new scheme ,which will cost government Rs 5,500 crore, will be introduced to refund the state levies which will make the industry more competitive to field in international markets.

Premo Global , Arvind, Kitex Garments, Alok Industries, Welspun Industries are amongst the few stocks which may benefit from the new textile policy in medium to long term.