As we near the end of 2018, it is time to take stock of the year gone by and look at the future with a lot of hope as the country picks up economic growth and we move towards increasing the size of our manufacturing economy from the current level of US$ 310 to US$ 1 trillion by the year 2025.

Towards $1 Trillion Manufacturing Economy

Official sources have estimated India’s manufacturing economy at around $310 billion in 2017-18. The Department of Industrial Policy and Promotion has embarked on an ambitious plan to formulate a roadmap for achieving $1 trillion manufacturing economy by 2025. Growth needs to gather momentum from the present level of 7% to at least 12% per annum if we are to reach the magical figure of US$ 1 trillion. While it appears to be a tall order it is not impossible to achieve it. To discuss the various issues and draw up a road map the CII, New Delhi organised a CII - DIPP National Forum on the theme “Towards $ 1 Trillion Manufacturing Economy” on 17 -18 December, 2018. Stalwarts from the textile and clothing industry and trade along with the Executive Director of the Council attended the forum and deliberated on various issues constraining the textile sector.

On the export front, cotton textiles have shown a growth of around 20% during the period April- November, 2018. If we sustain this level of growth we can scale new heights and achieve our export target of US$ 12.65 billion for the fiscal year 2018-2019.

Thus, the key questions before us as the new year dawns is how maintain the export momentum and increase our market share in overall global trade in textiles & clothing, apart from attracting investments, creating jobs in the manufacturing sector, scaling up production levels and identifying new markets and products to achieve the much needed quantum jump in our exports

Strategy for Textile Exports & Job Creation

As per recent announcements, the country's textiles sector, which currently employs over 45 million people, will require 17 million additional workforce by 2022. A statement released by the Ministry of Textiles states that in the last four years, 8.58 lakh persons have been trained in partnership with 58 government and industry partners to meet the sector's need for a skilled workforce. Considerable efforts are also being put in to ease the process and procedures for “doing business” with the hope of attracting investments.

The Ministry of Textiles has also embarked on a renewed strategy to boost exports focusing on diversification of markets, positioning India in value chain and promoting collaborative exports. Towards diversification of textiles exports, 12 markets viz. Vietnam, Indonesia, South Korea, Australia, Egypt, Turkey, Saudi Arabia, Russia, Brazil, Chile, Columbia and Peru have been identified. The Ministry also plans to pursue strategic engagement with Bangladesh and Sri Lanka on the Fabric-Forward Policy in close collaboration with our Council.

Trade Promotion

As part of our ongoing export promotional efforts, the Council participated in Irantex 2018 held in Tehran, Iran from December 2 to 5, 2018. 15 companies participated in Irantex 2018 through the Council. The Council’s booth served as an information centre to a large number of buyers visiting the fair. Iran is a good market for yarn, fabrics, madeups and technical textiles. Despite the bright prospects for cotton textile exports offered by this market, there exist trade related issues like the payment mechanism, which if put in place will lead to a further trade growth between the two countries.

GST Update

One of the key achievements of 2018 has been the stabilisation of the GST regime and the Government’s sensitiveness in addressing the need to simplify the procedures.

Towards this end, the Government has extended the deadline to file the annual returns for FY 2017-18 under Goods and Services Tax (GST) to March 31, 2019, which earlier was December 31, 2018. All taxpayers registered under the GST act between July 2017 to March 2018, have to submit the annual return in form GSTR 9 (for the regular taxpayer) or GSTR 9A (for composite taxpayers).

Collating all the information required for filing GST annual returns in one place is a very time-consuming task. We would request all our members to start with the process of reconciliation and GST audit, if applicable, at the earliest. It is important that the GST returns must be error free to avoid any consequences of incorrect annual return.  In this regard, members may get in touch with the Council for the necessary guidance.

Many of our members have represented that they had taken higher Drawback rates erroneously along with the Input Tax Credit immediately after the implementation of GST from July 1, 2017. While they have refunded the differential Drawback amounts to the Customs Authorities and have become eligible for Input Tax Credit, they have still not received the IGST refunds on such exports. The Council has taken up this matter with the CBIC and we hope it will get resolved very soon.  Exporters have also represented that they are unable to file their applications on the GST portal in Form RFD-01A for refund of unutilized Input Tax Credit, once they withdraw their applications along with the deficiency memo to reply to the queries raised. The Council has taken up this issue with CBIC and GSTN and is doing the necessary follow ups.

Study on Alternate Scheme

As you are aware, the Government is in the process of putting in place alternate schemes to promote exports which will improve the competitiveness of the products in the export markets. The Council has already commissioned Ikdhvaj Advisers LLP to undertake a study in this regard and the Study Report was awaiting release.

In this regard, the Council’s Vice Chairman, Shri Manoj Patodia along with the Executive Director and WTO experts Dr. Harsh Vardhan Singh & Shri Jayanta Dasgupta of M/s. Ikdhvaj Advisers presented the report on Alternate Schemes to Shri Suresh Prabhu, the Hon’ble Minister of Commerce and Industry & Civil Aviation on 19 the December at New Delhi. They also met Dr. Anup Wadhawan, Commerce Secretary and presented the report to him. The Commerce Secretary stated that he will convene a meeting of all the concerned officials shortly and discuss the matter.

Friends, the Government at both the level of the Ministry of Textiles and Commerce is well aware of the problems being faced by the exporters. In fact in a recent announcement, Hon’ble Union Minister of Commerce, Shri Suresh Prabhu has stated, that the Ministry of Commerce is preparing an incentive package for labour intensive sectors with a view to promote shipments and address issues of exporters. The Hon’ble Minister has acknowledged that there have been challenges for the export sector over a period of time, such as issues related to credit availability. The package would focus on labour intensive sectors such as leather, textile and marine products as they would help in creating jobs.

The package would also include steps to enhance credit flow to the export sector along with the need to reduce transaction costs.

Looking Ahead

Friends, a New Year beckons and we look forward to higher levels of export performance. The Ministry of Textiles and Commerce are assiduously working towards giving a specific direction to export growth by identifying new markets and working out new schemes to replace the old ones.

We are also hopeful that GST regime will be further simplified and in this connection the Hon’ble Finance Minister has announced that the Country would eventually move to a single standard rate of GST and the standard rate could be between 12%-18%. This is good news for all businesses!

Along with this, if some of the issues raised by the Council on GST are also addressed Industry would feel encouraged to move ahead with confidence.

We also hope that other issues like pending claims under TUFS/ATUFS are also cleared expeditiously and the Hank Yarn obligation is reduced from the present level of 40% to at least 20 % in the coming year.

Another structural change which will go a long way in addressing credit issues would be to change the basis of definition of SME’s from investment to turnover. We understand that the MSME Act needs to be amended and we hope that the Government will do so at the earliest available opportunity. This will enable a large number of firms to avail credit at easier terms and stimulate investments and growth.

Along with the structural changes in policy we should also scale up our design capabilities, provide specific assistance to companies to build brands, and undertake studies to identify future areas of growth in terms of products which are being traded in world markets but in which India has negligible/ modest presence. Having identified such products we should give ourselves a span of three years in which to attain global presence in these items.

Friends, the challenges are many, so are the opportunities.

Let’s all work together in the NEW YEAR to make things happen and scale new heights.

Wishing all of you “A Very Happy New Year”!!

(Dr. K. V. Srinivasan)