Comprehensive reforms needed to revive India's textile sector: GTRI

In a report released after the general election and the formation of the new government, GTRI said that India’s textiles and garment exports decreased in 2023 compared to the levels in 2015. Over the past two decades, Bangladesh and Vietnam have surpassed India despite their reliance on imported raw materials. GTRI suggested that value addition should be encouraged through innovation and new techniques.

GTRI meticulously identified critical issues spanning ten key government ministries and departments, each pivotal for catalysing India's growth trajectory. In the report titled Economic Transformation Agenda: Key Reforms for the New Government, the organisation highlighted that as India stands on the cusp of a transformative era, the need for comprehensive economic reforms has never been more urgent.

The organisation warned that India risks further losing ground in the global textiles and garments market if urgent reforms are not implemented. It highlighted a significant decline in India’s competitiveness. GTRI noted that the current PLI for textiles has failed to deliver the expected results and may be better off scrapped. An honest and thorough appraisal of all schemes, including PM MITRA, is urgently needed. Encouraging value addition in the textile sector through innovation and advanced manufacturing techniques, supporting the development of high-quality, high-value textile products, and enhancing market access and branding for Indian textiles globally are necessary steps.

GTRI suggested implementing these strategic reforms to ensure sustainable development and inclusive growth for the nation. It is a golden opportunity for the new government to simplify the basic customs duty structure, which affects $680 billion worth of imports. This structure has not been reviewed in 20 years, leading to over 27 different duty rates and over 100 specific or mixed duty slabs. Currently, 85 per cent of customs duty revenue comes from less than 10 per cent of tariff lines, while 60 per cent of tariff lines contribute less than 3 per cent of revenue. With some adjustments, the average import tariff could be reduced from 18.1 per cent to below 10 per cent without impacting important products. Simplification is necessary to avoid global criticism, as highlighted by Trump calling India the "tariff king."

GTRI recommended increasing the GST exemption limit for a firm's annual turnover from ₹4 million to ₹15 million. This will be transformative for India's MSME sector, promoting job creation and growth. Firms with less than ₹1.5 crore (₹15 million; ~$179.78 thousand) turnover make up over 80 per cent of registrations but contribute less than 7 per cent of tax collected. The new limit would reduce the GST system's load from 14 million taxpayers to less than 2.3 million, allowing for the introduction of invoice-matching for 100 per cent compliance, eliminating fake invoices and tax theft. Increased tax collection will offset the expected loss of 7 per cent in tax collection.

ALCHEMPro News Desk (KUL)