PLI for textile: Boosting production alone won't help | Economic Times

With Piyush Goyal replacing Smriti Irani as the new textile minister, following the recent union cabinet reshuffle, there seems to be a humongous task lying ahead of him. It is reviving the ailing textile and apparel sector. Providing direct employment to 45 million people, and indirect employment to 60 million people, this highly labour-intensive sector is only behind overall agriculture in terms of employment generation.However, in recent years, India has significantly lost its global competitiveness in textile and clothing to countries like Bangladesh and Vietnam. As a result, textile and garment exports in the sector have plummeted. While India’s overall merchandise exports reached an all-time quarterly high of $95 billion in the three months ending June 2021, readymade garments experienced double digit declines, as compared to June 2019 levels. India currently ranks sixth in the top world exporters of textile and apparel and has witnessed a decline in its share in global exports of textile and apparel from 4.84 per cent in 2015 to 4.34 per cent in 2018 at a CAGR of (-) 1.14 per cent (Trade Map, 2019).While the sector’s growth performance had deteriorated even before Covid, the pandemic induced subdued domestic demand coupled with declining exports because of the lockdowns have had a double blow for the manufacturers. To boost local manufacturing and exports to shore up employment in the sector, the government had recently approved the Production Linked Incentive (PLI) Scheme for the sector, with a total outlay of Rs. 10,680 Crore under the aegis of Atmanirbhar Bharat Abhiyan.The focus of the scheme is proposed to be on Man-Made Fibre (MMF) apparel and technical textiles. It is expected that the scheme could cover forty product categories under MMF, whereas ten under the technical textile segment. It is likely that incentives would be provided to both greenfield and brownfield investments under this scheme, between 3 to 11 per cent of the incremental revenues’ year-on-year for five years. By focusing on these two non-conventional segments, the PLI scheme for textiles is expected to bring about structural changes in the textile sector.While these changes could definitely help to diversify the export basket, the revival of exports could be short-lived. What we require is a much deeper participation by India in the manufacturing global value chains. The current Indian technical textiles market constitutes merely 13 per cent of India’s total textile and clothing market. As the production process is getting fragmented globally, the idea to boost production alone does not go very far in alleviating exports. Nor does it help the ‘Make in India’ cause of the government. Our recent study at ICRIER shows that India’s exports are becoming import-oriented, as the foreign content in exports increased sharply from 15.9 per cent in 2003-04 to 27.2 per cent in 2013-14. In the textile sector, the study estimates that the foreign value-added share rose from 13.03 per cent in 2003-04 to 19.40 per cent in 2013-14. As the cost of labour has been rising progressively in China, it is losing its competitive edge in labour-intensive industries like textiles. India, with its large labour force and a vast domestic market, has a great opportunity to step up and fill the gap. Getting integrated into the GVC for textiles can help immensely in creating widespread employment and reviving exports by fostering innovation. While integrating into GVCs seems the way forward, one must be mindful of the huge skill gap existing in the sector. According to our 2019 study at ICRIER, skill mismatch in India’s textile and clothing sector stood at a whopping 68 per cent in 2011-12, as against the overall skill mismatch of 33 per cent in Europe, and 54 per cent in Turkey.Over the years, export related jobs have grown at a much faster rate than overall employment. While a chunk of these jobs has gone to persons with below secondary education, the rate of growth of these low-skilled jobs has declined. Our recent estimates show that the share of unskilled jobs tied to textile and allied exports declined from 29.64 per cent in 2003-04 to 23.67 per cent in 2013-14. The share of high-skilled jobs increased from 20.91 per cent to 26.15 per cent during the same period. With the skill composition of export related jobs shifting towards high skill, we require greater investment in skill development to make sure that we do not expose the less skilled workers to the risk of offshoring.The newly appointed textile minister, Piyush Goyal, who also leads the Centre’s PLI scheme under his charge as the Minister of Commerce and Industry is likely to review the scheme soon. It is expected that the scheme would incentivize the textile manufacturers to integrate more deeply into the GVCs for reviving growth and generating employment in the textile industry.(The writer is Consultant at ICRIER. Views expressed are personal)