Tale of two sectors: Making India a global hub for chemicals and textiles

By RS Jalan 

The road to $5-trillion economy needs efforts at promoting ease of doing business to attract more investments. The upcoming Budget is an opportunity to undertake industry-specific initiatives rather than announcing a single big-bang reform and expecting a positive cascading effect on all sectors. New areas have to be identified and targeted changes instituted to boost GDP from $3 trillion at present to the targeted $5 trillion. Chemicals and textiles are two industries where a positive budgetary intervention will deliver considerable dividends to the economy.

FM Nirmala Sitharaman should take initiatives to make India the global hub for chemicals and textiles manufacturing sector. India’s share in the global chemicals industry is 2%, and there are opportunities for companies to grow, given the right support. Cheap imports from Turkey, the US and China for products such as soda ash stress the industry and the government may raise import duty from 7.5% to 15% to restrict imports and boost Make in India.

FTAs need to be done with care and deter dumping of cheap goods into India. Chemicals is a heavy capital-expenditure industry and would welcome some capital expenditure-based incentives to facilitate fresh investments for capacity enhancement. Likewise, textiles is one of the oldest sectors, which adds much economic value, both in the form of a 2% contribution to GDP as well as generating employment. It accounts for 7% of the total industry output in the country and adds much stimulus to imports. Thus, it works well for the government to ensure stable growth of the sector.

Cut in import duties on sustainable fibres will ensure an array of eco-friendly textiles that will attract environmentally-conscious consumers. Investments are needed towards developing skills of the existing workforce and updating curricula of textile institutes so that the skill sets of the employable youth stay relevant.

Given that both short-term and long-term measures are needed, it is essential that in addressing short-term challenges the larger goals are not compromised. The Union Budget is a capable instrument that can sustain long-term goals while effectively addressing short-term challenges.

Source: Financial Express