New Delhi: India will try to reduce taxes and interest rates for the textile industry to provide relief for the embattled sector, Union textiles minister said on Friday.
“As part of a short-term strategy, the government will strive to rationalize fiscal structure, exempt service tax, reduce interest rates on pre- and post-shipment credit and facilitate faster clearance of arrears on terminal excise duties and central sales tax,” Dayanidhi Maran told an industry conference.
India’s overseas textile sales, about 13% of all exports, have been hit by declining demand from key markets like the United States and Europe, as well as a firming rupee.
The Indian rupee has risen 2.4% against the dollar so far in 2009, after declining 19% last year, making exports less competitive.
Maran said textile exports were flat in the year to March 2009 from a year ago, when they stood at $22 billion, adding efforts were being made to get exports back to their earlier growth rate of 7-8%.
“All the exporters are trying to get back to the regular process of 7-8% growth year on year. Industry is quite optimistic and I am also quite optimistic we will be able to achieve that.”
Earlier this month, Maran said the $52-billion labour intensive industry needed more fiscal stimulus and would need investments of Rs30000 crore each year to sustain an annual growth rate of 8-10%.
Maran also said he had no objection to higher minimum support prices (MSP) for cotton, as long as it did not hurt the textile sector.
The government had hiked the MSP for cotton, a key raw material for textile makers, by 33-40% last October, leading to concerns it may lower the competitiveness of textile firms.
He said the textile ministry would work with the agriculture ministry to ensure cotton prices do not hurt industry.
“We will be working closely with the agriculture ministry to ensure we do not tilt the balance (between industry and farmers) anyway.”
Maran said the ministry would strive to create 10 million additional employment opportunities in the sector, which provides direct employment to about 330 lakh people.
India’s textile and clothing industry contributes 4% to the GDP, 14% to industrial production and 12% to export earnings of the country.