1

June 2016

Government of India

Employment Generation & Promotion of Exports in

Textile & Apparel Sector

2

Outline

I. Export & Employment Potential

II. Decisions

– Production / Employment Incentives

– Labour Productivity Incentives

– Tax Incentives

Sector’s Potential

• Incomparable employment potential of garmenting sector

• Every 1 crore rupees of investment– generated a minimum of 70 jobs in garmenting sector – as compared to 10 persons in steel & 25 persons in automobile sector

• Presence of the entire value chain in India – from fibre to apparel manufacturing

• China ceding space due to – focus on high technology sectors; and – rising wage costs

3

Source: Calculations based on data published by Office of Textile Commissioner and industry estimates

Current Potential AdditionalEmployment Generation 31.9 Million 56.9 Million 25 Million

Exports US$ 40 bn. US$ 57 bn. US$ 17 bn.*Investment required to balance the value chain = US$ 30 bn.

Sector’s Potential

Apparel exports of Bangladesh and Vietnam have surpassed India’s apparel exports

19951996

19971998

19992000

20012002

20032004

20052006

20072008

20092010

20112012

20132014

20152016

20172018

3 3 3 4 45 5 5

78 8

11 1114 15

17

22 23

2629

3134

37

40

1 1 1 1 1 2 2 24 5 5

68

10 1011

1415

18

21

24

28

32

37

4 4 4 4 5 5 5 5 6 68 9 9 10 11 11

14 13

16 17 17

21

29

43

apparel Exports (US$ bn)

India was the clear leader from 1995 to

2000

Bangladesh’s apparel export

exceeded that of India in 2003

Vietnam’s apparel export exceeded

that of India in 2011

BangladeshIndia

Vietnam

Today India is the smallest apparel

exporter among 3

Data Source: UN Comtrade

With policy support, India can again regain its position in next

3 years

Projections

Production & Employment Incentivesand

Labour Reforms

Decision: Additional Employment in Garment Manufacturing Sector – Tax and Production Incentives• Reduction in number of working days from 240 to 150 under section

80JJAA of Income Tax Act ; • Additional 10% ATUFS subsidy for garmenting : Scheme for three years

– In additional 15% being given at present– Based on additional production and employment generated after a period of 3

years; • Government to bear entire 12% of Employee Provident Fund Scheme

contribution of employer – including balance 3.67% contribution– For all new employees enrolling in EPFO, for first three years; with salary up to Rs. 15,000

per month– Bringing employees to formal sector

• Impact in three years:→ Increase in exports by 2.6 billion US$ → increase in employment by 12.25 lakhs → increase in investment by 7 billion US$ 7

8

Decision : Flexibility in Labour Laws to increase Productivity

• Overtime hours for workers not to exceed 8 hours per week in line with ILO norms– Increased earnings to workers

• Introduction of Fixed Term Employment under Sub section 1 (15) of the Industrial Employment (Standing Order) Act, 1946– Benefits of regular employment

• Making employees contribution to EPF optional for employees earning less than Rs 15,000 per month– Additional take home wages to employees; option of choice

• Impact in three years:→ Increase in exports by 1.4 billion US$ → increase in employment by 1.75 lakhs → increase in investment by 4.2 billion US$

Tax Issues

10

Decision : Additional Incentives under Duty Drawbacks for Garments

• Special scheme for remission of State levies by Ministry of Textiles for three years

• Rebate to be worked out by Drawback CommitteeNet additional outflow approximately Rs. 5500 crores

• Drawback at All Industries Rate should be given even when fabric inputs are imported under Advance Authorization Scheme

• AIR to be worked out by Drawback Committee• Impact in three years:

→ Increase in exports by 9.5 billion US$ → increase in employment by 9.5 lakhs → increase in investment by 2.7 billion US$

Summary – 3 year Impact

11

Segment / Intervention Annual outgo

Additional Investment(US$ bn.)

TotalEmployment

Direct & Indirect(Lakhs)

AdditionalExports

(US$ bn.)

Measures to Enhance Competitiveness of the Apparel Industry

NIL 1.6 5.7 5.7

NIL 2.7 4.0 4.0

80JJAA AmendmentsRs. 400 -

500 crores 2.6 12.25 7.0Additional TUFS for garmenting

Additional 3.67% EPF contribution

Additional 5% duty drawback for garments

Rs. 5,500 crores 2.7 9.5 9.5

Labour law reforms NIL 1.4 1.75 4.2Direct employment :upstream segments @35% (yarn, fabric & processing) -- -- 10.7

Indirect employment* (1:1.3) -- -- 56.4 --Total Rs. 6,000

crores 11.0 100.3 30.4

Thank You