indian textile industry

Impact of 2022 budget on Indian Textile Industry

budget announcement by finance minister

The last couple of years have been a bumpy ride for the textile industry.

With pandemic stalling manufacturing, an increase in cotton prices, labor shortages, etc. it was evidently a nightmare.

But if we look at the numbers, there has been a 41% increase in textile exports from April-December 2021 against last year.

Smaller countries like Vietnam and Bangladesh have overtaken India in this segment.

The entire industry was looking forward to the 2022 Union Budget announcement with hopes to find help from the Government of India to be more competitive in the global markets and become par with its challenges.

Today the Union budget was announced.

We will look at textile industry-related announcements and their impact.


Table of Content:

  • Budget announcement affecting textile industry
  • The window of opportunity
  • What were the expectations before the budget announcement?
  • Conclusion


Budget announcement affecting Textile Industry

Finance Minister Nirmala Sitharaman today while presenting the 2022-2023 Union Budget announced that the production linked incentive in 14 sectors will create 60 lakh jobs and has the potential to generate Rs. 30 lakh crore in production over the next five years.

Based on the Economic Survey, it is estimated that this scheme will result in an additional Rs. 19000 crores of fresh investment in the textile sector.

This is expected to create a cumulative turnover of over Rs. 3 lakh crore and create over 7.5 lakh additional job opportunities in this sector.

In the previous Union Budget (2021-2022), the government has assigned an outlay of Rs. 1.97 lakh crore.


The Window of opportunity

narendra modi prime minister of india

The global companies are adopting a “China Plus One” strategy in their manufacturing practices.

This is a positive opportunity for India to take advantage and bite a bigger piece of the pie.

It is estimated that the global textile industry is around $1 trillion.

China is having a market share of 30% – 36%.

Even if India could grab 1% of this market share it will be a $10 billion market.

The Indian government has set a target of $100 billion in exports over the next five years.

These announcements are expected to prepare the Indian textile industry to propel and scale massively in this direction.


What were the expectations before the Budget announcement?

Woven fabric manufacturing on a machine

  1. A 10% customs duty was levied on the import of cotton fiber. It was expected to be eased in order to control the yarn prices. If yarns are duty-free then the domestic supply would increase and prices would go down.
  2. It is expected from the government that the RODTEP scheme is extended this year also. Rebate of State and Central Taxes and Levies for Garment exports and Remission of Duty and Taxes on Export Products for the yarn and fabric industry. These schemes help the industry get rebates of embedded central and state taxes.
  3. PLI Scheme to be introduced for cotton textiles and counter the shortage of short-staple spinning capacity.
  4. SOPs for textile parks.


Conclusion/Key Takeaways

Even though all the expectations were not met in the 2022-2023 Union Budget, the PLI scheme will make a positive impact on the textile industry.

Earlier, The Goods and Services Tax (GST) Council had decided to defer the hike in the tax rate on textiles from 5% to 12%.


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