Interim Budget should extend the export duty waiver scheme for textile industry

The textile industry is a traditional industry of India. The industry has a host of expectations from the budget. It thinks that the full year budget in July will be able to meet these expectations in a better way. One expectation from the interim budget is that Remission of Duties and Taxes on Exported Products Scheme (RoDTEP) be extended till September 2024. This scheme is set to expire in June 2024. That will be before the coming of the full year budget in July. So Interim Budget needs to address this issue.

RoDTEP scheme makes Indian textile products more competitive

Under RoDTEP scheme, various duties and taxes on exported textile products are waived off by the government. This helps in making exported textile products from India cheaper in the global market. This in turn makes them more competitive. Indian exported textile products face tough competition in the global market from countries such as Bangladesh and China.

Reduction or elimination of import duty

Another expectation of the industry is that import duty on cotton be reduced or eliminated. In 2022, between April and July, the government had waived off the import duty on cotton. Indian textile industry is a major importer of cotton. According to data from Government, in the April – January period of FY 23, India’s cotton imports increased y-o-y by 200% to $1 billion. Lower domestic production of cotton in the past few years has increased reliance of textile industry on imported cotton.

Elimination of import duty on cotton will make the cost of domestically produced cotton textile products lower. This will come as a relief for domestic consumers too. Inflation in textile products has added to overall inflation rate. In the past few years, increase in prices of cotton clothes has reduced their domestic use.

Textile industry remains one of the biggest employers

The textile industry is among the biggest employers in the country. According to data from Ministry of Textiles, Government of India, it provides direct and indirect employment to around 45 million Indians. In the Budget just before general elections, providing some relief or incentives for this industry, may make sense for the government.