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Q. Centre’s package incentives to textile sector: Discuss how central government’s new package will boost the textile sector?
Jun 24, 2016 Related to : GS Paper-3

Ans :


The textile sector is second largest employment generating sector in India (Agriculture is first). It offers direct employment to over 35 million in the country. Traditionally Indian textile sector has made footprint in global market, but it share has been came down in last few years.

Present status-

  • The core of the textile sector is still deeply troubled. It has experienced the highest job losses as old textile mills, unable to upgrade their technology, lost out to newer and more modern manufacturers.
  • Seasonal nature of apparel industry is also created problem and affected employees and owners of the textile mills.
  • India is losing out in apparel exports to neighbouring countries such as Bangladesh which enjoy preferential tariff access to key markets such as the US and the EU.
  • Over the last decade-and-a-half, India has lost its global share to smaller countries like Bangladesh, Vietnam etc. In this period India has slipped to fifth position as an apparel exporter, with both Bangladesh and Vietnam ahead of it.

Central government’s new Initiatives-

  • Government has approved Rs 6,000 crore special package for textiles and apparel sector.
  • The subsidy provided to garment units has been increased to a healthy 25% from current 15%.
  • The government has also allowed relaxation for the garments sector to enhance scope of exemption under the Income Tax Act
  • Government has decided to introduce fixed-term employment in garment industries.
  • Government decided to raise the cap of overtime hours to 8 hours per week in line with International Labour Organisation (ILO) norms.
  • The Centre has also decided to bear the employer’s contribution of 12 per cent to the Employees’ Provident Fund Scheme for all new employees earning less than ₹15,000 a month.

How these initiatives benefits?

  • The package of incentives will boost the Indian textile sector. These steps will lead to increased competitiveness of India's apparel exports and improve employment generation in the garment sector given its labour intensiveness.
  • It will create huge jobs and the majority of new jobs are likely to go to women since the garment industry employs nearly 70 per cent women workforce. Hence it helps in women empowerment.
  • The decision to introduce fixed-term employment and maximum of eight hours a week of overtime for workers in the garment industry is significant. Despite the non-permanent nature of employment, fixed-term workers will be considered on a par with permanent workers in terms of working hours, wages, allowances etc
  • With new initiatives, the cost differential that India suffers vis-a-vis to competing countries has been addressed to the large extent, hence it will increase India’s competitiveness in global market.

Suggestions- The domestic textile sector suffers from lot of structural inefficiencies, like garment manufacturing clusters are located away from fabric manufacturing clusters. Fragmentation of Indian textile industry leads to lot of systemic inefficiencies and competitive disadvantage for India's textile exports. Hence to improve competitiveness India needs to address these issues.


Textile sector is most important sector for India’s economic point of view. Since last two decades Indian textile industries is facing various issues and it lead to fall in its export competitiveness. In this background the new initiative will definitely boost the textile sector. These measures like streamlining labour norms, offering tax breaks etc will give a big fillip to domestic garment-makers to improve their competitiveness in global market.

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