PLI for textile: Govt targets 50 laggard, high-potential products

Through a Rs 10,683-crore production-linked incentive (PLI) scheme, India, where cotton fibre dominates the textiles and garment value chain, intends to grab a share in this pie.

From jerseys, pullovers and cardigans to swimwear and windcheaters, the government is targeting elevated production in 50 man-made fibre and technical textile product categories in which India barely makes a cut now. While global exports of these products stood at $222 billion in 2019, India’s share was only $1.8 billion, or 0.8%, with both Bangladesh and Vietnam leading by a wide margin.

Affiliate Marketing

Through a Rs 10,683-crore production-linked incentive (PLI) scheme, India, where cotton fibre dominates the textiles and garment value chain, intends to grab a share in this pie. The incentives will be extended for incremental production in 50 product categories (40 man-made-fibre-based garments and 10 technical textiles) over a five-year period starting FY22.

According to the draft PLI programme, known as the “Focus Product Incentive Scheme”, India accounted for 4.3% (or $35.5 billion) of global exports of textiles and apparel in 2019 but its share in the man-made fibre segment was much lower at 2.8% ($9.3 billion). In fact, products based on man-made fibres made up for only 26% of India’s exports, compared with almost 50% in China and 49% in Vietnam.

For instance, in jerseys, pullovers, cardigans, waistcoats and similar items, while India exports were only to the tune of $70 million in 2019, global exports stood at $26.1 billion. In anoraks, windcheaters, jackets, etc, global exports exceeded $21 billion but India’s share was less than just $10 million. Similarly, while global exports of trousers, bib and brace overalls, breeches and shorts stood at $16 billion in 2019, India’s were languishing at just $123 million. Of course, India’s exports of these products made of cotton fibre were substantially higher.

In fact, India’s exports of products in the 40 apparel categories, which are targeted under the PLI scheme, stood at just $1.1 billion in 2019, against $140 billion globally. Importantly, Bangladesh’s exports of these products were as much as $7.3 billion and Vietnam’s $14.8 billion.

As reported by FE, the PLI scheme for textiles marks a paradigm shift in the government’s decision-making on two counts. First, it earmarks big bucks for big companies, shedding its long and costly bias towards small businesses. Second, it seeks to correct India’s historical policy preference for a cotton-dominated value chain, which is contrary to the global trend. The idea is to reclaim India’s export markets after ceding substantial ground to Bangladesh and Vietnam in recent years.

The incentives, ranging from 7% to 11%, are linked to turnover or investments and will be trimmed by 100 basis points each year after the first year. The highest incentive–11%–is meant for large investments of over Rs 500 crore in greenfield projects. The benefit, however, is linked to an incremental turnover of Rs 1,500 crore in the first year and a 25% rise in turnover each year after that.

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Source link