Investment Opportunities in the Indian Textile and Garment Sector

The textile industry is one of the most prominent industries in India. The sector contributes about 14% to the total industrial production and is a source of employment for nearly 35 million people. Thanks to healthy policies undertaken by the Government of India, investment opportunities have increased manifold in the sector.

Investment Opportunities in India

It is a well-known fact that Indian textile and garments are held in high esteem in both domestic and foreign markets. Low manufacturing costs and availability of cheap labor have enticed several foreign firms to establish base in India. In the Union Budget 2013-14, Government of India announced a slew of measures including tax exemptions for the textile and garments industry.

The new excise regime proposed in the budget would ease the cost pressure within the industry. The budget removes excise duty on branded garments. This would not only lower manufacturing costs, but also attract foreign investments. The sector expects a 5-7% increase in FDI by the next financial year.

The Government of India’s announcement to continue with the Technology Upgradation Fund Scheme (TUFS) in the 12th five year plan (2012-17) will leverage investments in technology upgradation in the textile industry. In the current market scenario, it is extremely important for Indian textile and garment manufacturers to be technologically competitive. In the recent five year plan, Government of India plans to invest nearly US$ 9.1 billion on textiles as against US$ 4 billion in the previous plan.

Schemes by Respective State Governments

Apart from Government of India, several schemes announced by respective state governments have bolstered investment opportunities in the sector.

  • Recently, the Rajasthan Government adopted a new textile policy under special customized package, 2013. The package cleared by the Rajasthan cabinet in July is expected to attract investment worth a whopping Rs 10,000 crore over the next seven years in the state. Not only this, it will also provide employment opportunities to nearly 50,000 people.
  • The West Bengal Government is expecting an investment of Rs 14 billion through its integrated textile park in Belur. The textile park in Belur will accommodate around 5,000 power looms and the operations are expected to commence within two years after its construction. The Bengal Government is also expecting investment of Rs.1 billion through the new silk park in Malda.
  • In its latest textile policy, the Gujarat Government has announced 5% interest subsidy on bank loans for people willing to set up new plants for value addition processes on textiles like ginning, processing, weaving, knitting and machine carpeting. The subsidy will be available for a period of five years.

The Road Ahead

India is expected to become a key player in the global textile and garment sector, both as a consumer and a producer. However, to sustain against competitors, it is vital for Indian manufacturers to up the ante. International apparel brands have already started eyeing India as a major investment destination. The industry’s consistent growth coupled with increasing demand for Indian textiles and garments worldwide have opened up new avenues for investors in the sector.