Union Budget proposes setting up textiles mega clusters

In his maiden Budget, Union finance minister Arun Jaitley has proposed setting up a few mega textile clusters and has allocated Rs 200 crores for the purpose. These will come up in Bareily and Lucknow in Uttar Pradesh, Surat and Kutch in Gujarat, Bhagalpur in Bihar, Mysore in

Karnataka, and one in Tamil Nadu.

Budget Incentives

The FM has given a few more sops to the textile sector. For

Jammu & Kashmir this includes setting up of Pashmina Promotion Programme (P-3) and a programme for the development of other crafts with an initial outlay of Rs 50 crores. Setting up a Trade Facilitation Centre and a Crafts Museum at an outlay of Rs 50 crores to develop and promote handloom products and carry forward the rich tradition of handlooms of Varanasi, where a textile mega-cluster would also be supported. The FM has kept aside Rs 30 crores for setting up a Hastkala Academy for the preservation, revival, and documentation of the handloom/handicraft sector in Public-Private Partnership (PPP) mode in Delhi. Moreover to boost domestic manufacture and to address the issue of inverted duties, he proposed reduction of the basic customs duty (BCD) on specified inputs for manufacture of spandex yarn from 5 percent to Nil. Also, service tax on loading, unloading, storage, warehousing and transportation of cotton both ginned and baled, has been removed.

In order to boost exports, he announced increasing import incentives for garment exporters and scrapping of basic customs duty on precious and semi-precious stones. Jaitley said, “To encourage exports of ready-made garments, I propose to increase the duty free entitlement for import of trimmings, embellishments and other specified items from 3 percent to 5 percent of the value of their exports.”

Jaitley has brought the smile back on the faces of small entrepreneurs, by providing investment allowance at the rate of 15 percent to a manufacturing company that invests more than Rs 25 crores in a year in new plant and machinery. This can be available for three years i.e. for investments upto March 31, 2017. This Scheme will continue to operate parallel to the scheme announced last year for the period till March 31, 2015.

E-commerce route encouraged

Jaitley also announced that foreign companies manufacturing products in India can sell their merchandise through the e-commerce route. This will surely help a host of foreign retailers including Puma, Benetton, Marks & Spencer and Decathlon among others, who source a portion of their products within India.

Foreign retailers have been demanding for foreign direct investment in India's booming e-commerce market. Sandeep Ladda, India Technology Leader at PwC, through a statement said that “Liberalisation of FDI in e-commerce sector will provide much-needed certainty to foreign players and to a sector that has the promise to provide increased commerce and generate employment in the country. This will also provide boost to the sector and create healthy competition so as to benefit all the constituents in the ecosystem - consumers, government, e-commerce players, and retailers in general.” However, the Finance Minister did not clarify the percentage of foreign investment that will be allowed in the sector.

Jaitley has also announced a cut in the excise duty on footwear from 12 percent to 6 percent. The announcement brought a 10 percent surge in footwear stocks listed on BSE. Following the announcement, Bata India and Liberty Shoes stocks traded as much as 6 percent high. At 1.20 pm, Bata India saw rise of 4.47 percent, quoted at Rs 1,289.70 while Liberty Shoes was up by 5.64 percent on BSE standing at Rs 295. The excise duty cut will be applicable on retail footwear priced up to Rs 1,000 per pair.