Union Budget's Impact On Indian Garment And Apparel Industry
Apparel|February 2021
One of the hardest hit sectors during the pandemic was the Indian Garment and Apparel Industry. To offset losses in the MSME sector, the government has introduced some key offerings that may become a game-changer. Samir Alam analyses…
Samir Alam

The Indian Garment and Apparel Industry was one of the hardest hit by the coronavirus pandemic in 2020. Stringent lockdowns, job losses, disruptions in the raw material supply chain, and plummeting demand across national and international markets had crippled it. The global retail industry is dependent on the low-cost, labor-intensive textiles producing countries like India. Setbacks in India, not only pose a threat to domestic economy but have also crippled parts of the global trade as well.

To offset losses, many in India wanted the central government to initiate concrete steps in the Budget 2021-22. According to the CMAI (the Clothing Manufacturers Association of India), 80 per cent of all garment manufacturers want more financial support from the Indian government in 2021. The pandemic and its on-and-off lockdown effects had crushed the finances of manufacturers, and a serious capital push could only help their recovery.

Since most manufacturers fall in the micro, small, and medium enterprise (MSME) sector, sharp falls in production prevent paying up wages on time or sustaining production processes. Garment manufacturers wanted to bring back jobs to their industry which is the largest employer after agriculture. Producers also want incentives for production, at least for a year, to help reenergise the sagging fortunes of the industry.

Among other demands, a rationalized duty structure on all type of finished products has also been proposed as it may help local players compete with other low-cost but technologically superior production centers like Vietnam, Bangladesh and Turkey was also key. In this article, we’ll take an in-depth look at what the budget actually delivered and its potential consequences for the Indian industry.

INITIATIVES IN BUDGET 2021-22: EXPECTED IMPACT

To start off, a key offering for the sector included in the Budget was the reduced duties on raw material inputs. Reduced customs duties on caprolactam, nylon fiber, nylon chips, and woven yarn to five percent is expected to benefit nylon and synthetic apparel producers. By relaxing the tax burden on raw materials, the government will ease the pressure on producers procuring raw materials from sources.

Similarly, the government made changes to cotton as it is an essential generator of employment and can infuse growth to allied industries as well. The Budget raised customs duty on imported cotton from nil to 10 percent and 10 to 15 percent on raw silk and silk yarn. Industry pundits believe this will make imports costly and boost export-oriented jobs.

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