India’s textile and apparel industry is in a crisis and needs fixing. Widely regarded as the second-highest employment generator after agriculture, the sector employs around 45 million workers directly and another 60 million indirectly across the country.
The economic shocks that follow the COVID-19 pandemic come at a time when the sector was already struggling from the aftereffects of demonetization and other declining economic indicators. While there is no denying the need to arrest the spread of the virus by any means possible, including a full or partial lockdown, the need to manage its economic aftermath is just as urgent.
Many global buyers are expected to file for bankruptcy or go into liquidation, which would leave textile manufacturers including those in India with crippling levels of bad debt. It is certain that closing stores and factories across the country for a period of three weeks would cost India’s textile and apparel industry dearly. The export sector is already besieged with cancelled orders and a drying up of future orders for the next four to six months. Domestic consumption was probably the last oasis, but with the shutdown of all forms of commerce, stakeholders are left with few options.
Given the current scenario, many Indian industry players have shelved expansion plans indefinitely and have in some extreme instances even been asking customers for contributions to their salary fund. Our policymakers should take these measures which can be instituted for immediate relief and would help the sector get back on its feet in the coming months.
Wage Support: Providing direct wage support of anywhere between Rs 5000-Rs 7000 per worker for even one month (assuming the lock down is lifted by mid-April) would ensure that the most pressing problem – layoffs and unemployment – is at least partially staved off.
GST Refund
The swiftest way to reach the maximum number of stakeholders is to refund GST payments made in part or full for the past six months.
Special Package of Incentives for the Export sector: The sector would need an immediate package of incentives such as Extra Duty Drawback on exports made in the previous Financial Year (since exports are likely to be slow in coming months), and obviously, a continuation of the same to this Financial Year.
Reduced GST
Once the lock down is lifted, the government can provide a reduced GST rate on all textile articles to kick-start demand until the industry recovers sufficiently just as they had done for the auto industry in the recent past.
All of the above may be partially financed by an anti-dumping duty on Chinese textile imports for the next 12 months. It will be no one’s case in the foreseeable future to argue against this measure. And while it may serve as a token measure at best, it will definitely find resonance amongst many in the comity of nations.
