Textile Sector: Nothing To Cheer About

The textile industry had a long wish list ahead of the Union Budget 2012-13. However, though the sector is one of the largest employers, it has hardly got anything to feel elated about. There were very few announcements related to this sector despite its demand for urgent attention.

Negative

The first and the foremost expectation was about the extension of the Textile Upgradation Fund Scheme. This was the scheme under which the industry got the benefit of 5 per cent interest reimbursement of the normal interest charged by the lending agency. The scheme was extended till March 31, 2012. While the industry had expected further extension of the scheme, it has not been done so. The textile companies are highly debt-burdened and hence the scheme provided a solace. The cessation of the scheme will result in higher interest outgo and this will be a negative factor for the industry.

Marginally Positive

While one of the negatives has been the excise duty on readymade garments that has been increased from 10 to 12 per cent, what provides solace is the increase in the level of abatement to 70 per cent from the level of 55 per cent. This comes as an advantage for the readymade garment manufacturers as the excise outgo will be lower, as can be seen from the table below.

Excise Outgo Calculation

Neutral

There are certain announcements about the reduction in custom duty, as indicated in the table below. However, we feel that the announcements will hardly make any positive impact on the textile sector.

Custom Duty Changes

Neutral

The government has announced a financial package of Rs 3,884 crore for the waiver of loans of handloom weavers and their cooperative societies. While this is a positive, it was already announced earlier and only gets mentioned in the budget. Further, it hardly provides any positive factor for the stock markets as hardly any company is a listed one.

Conclusion

Considering all the above mentioned factors it seems that there is not much to write home about for the textile sector. The export-oriented sector is already ailing due to a poor global economic scenario. With no major positives announced for the sector, the budget appears to be a negative one.