Interest subsidy to slash cost of garments industry

Last Updated: Thu, Dec 27, 2012 19:00 hrs

The decision to extend two per cent interest subsidy to some labour-intensive industries, including textiles, garments and handicrafts, till March 2014 has brought cheer to the garments industry. It would help garment manufacturers reduce working capital expenditure and, consequently, production costs. India is losing ground in exporting apparel to high-margin Western destinations to new competitors such as Indonesia, Bangladesh, Vietnam, Turkey and Mexico, as the cost of manufacturing in India is very high.

“The decision to extend the two per cent interest subvention scheme for specific sectors up to March 31, 2014 is timely and would help boost exports. It would surely give a thrust to the apparel and textiles sector, reeling under the sluggishness in the US and European markets. The impacted markets, especially in Europe and America’, and the resultant weak demand have adversely impacted our exports,” said A Sakthivel, chairman of the Apparel Export Promotion Council. With the extension of interest subsidy, garment exporters would now be able to reduce prices of garments and compete with major exporting nations. Rahul Mehta, president of the Clothing Manufacturers Association of India, said the government’s move was a positive one.

While apparel exports fell 7.2 per cent to $989 million in August, for the April-August period, these plunged 12.16 per cent to $5.26 billion. The decline was, however, in line with the fall in overall exports, which fell 6.79 per cent to $143.6 billion in the April-September period. Apparel exports account for about half of India’s textile exports.

Sanjay Lalbhai, chairman and managing director of Arvind Ltd, a textile major, said, “We have a unit that produces garments. The interest subsidy would definitely help us. Also, since all our borrowings are in rupees, this would help us.” However, Mitesh Shah, vice-president of the company, said, “The interest subsidy would benefit only on the books; it wouldn’t help boost garment exports in any way.”

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