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Sansad TV: Handloom- Our national heritage

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Introduction:

We the people of India, for us our clothes are not just our attire. With this attire, we also wear our emotions, we wear our love and our loyalty too. It is rooted in our traditions, in our heritage and our culture.

Background of this sector:

  • India exports about 95% of hand-woven fabric in the world. In India itself, handweaving covers one of the largest sectors in Indian economy and it provides employment to about 43 lakh weavers.
  • It is time to encourage citizens to use more of handloom products because a certain increase of 5% in the consumption would help the handloom market and revenue grow by over 33%.
  • August 7 was declared as the National Handloom Day in 2015 to mark the 1905 Swadeshi movement.
  • It was on August 7, 1905 that the formal proclamation of the Swadeshi Movement was made in a meeting at the Calcutta Town hall. The movement involved boycotting British products and the revival of domestic products and production processes.

Challenges faced by Indian handloom sector:

  • Market Reality: India’s handloom industry grapples with domestic issues including outdated technology, inflexible labour laws, infrastructure bottlenecks, and a fragmented nature of the industry.
  • The handlooms sector in India, primarily dominated by the unorganized and small players, had taken a major hit with demonetization and the implementation of the goods and services tax (GST).
  • Global Policies: According to the WTO’s Agreement on Subsidies and Countervailing Measures, a country needs to phase out export subsidies for a product as it achieves export competitiveness, defined as 3.25% share in world trade, and the per-capita income reaches more than $1,000 per annum.
  • As per this agreement, India is under pressure to end export subsidy for the handlooms sector by 2018.
  • This implies that the existing subsidy schemes including the Merchandise Export from India Scheme (MEIS) and the Export Promotion Capital Goods (EPCG) Scheme will get affected by the same.
  • Demand for MMF: Globally, manmade handlooms and garments are in high demand, with the ratio of cotton-to-manmade-fibre consumption at 30:70.
  • India, despite being the second-largest handlooms exporter in the world, lags in this category because of unavailability of manmade fibres at competitive prices.
  • Free-trade pacts: like the South Asia Free Trade Agreement (SAFTA) have led to intense competition from countries like Bangladesh which have zero-duty access to the Indian market. The government should take a re-look at such pacts and try to work out a solution.
  • The government should aim at driving scale across the handlooms value chain by encouraging large investment, consolidation of firms and enlargement of clusters.
  • Impact of recent reforms: The sector went through a phase of stagnating exports, demonetisation, bank restructuring and implementation of the Goods and Services Tax (GST).
  • India, which was the second largest exporter of Handloom & Clothing between 2014 and 2017 after China, slipped to the fifth place losing its position to Germany, Bangladesh and Vietnam.
  • Delay in disbursal of subsidies: Fast-track disbursal of subsidies for technology up-gradation under the TUFS scheme to help the industry modernise the operation.

Measures needed:

  • Government needs to move away from export-specific subsidy, which violates WTO norms, to focus on regional and cluster subsidies, technology upgradation and skill development subsidies, which benefit all the producers.
  • In India, cotton and manmade fibres (MMF) have differential tax treatment, here fibre neutrality will give a boost to the industry.
  • Under differential tax treatment cotton is taxed at 5% and manmade fibres at 12%.
  • In fact, of the total handlooms and clothing exports from India, cotton accounts for around 75%, there is a need to increase production with the global consumption patterns.
  • While India has abundant supply of labour, flexibility in labour laws and adequate skilling will give a big boost to the handlooms industry.
  • For instance, women should be allowed to work in all three shifts, after taking into account adequate safeguard measures.
  • Technology upgradation schemes will help Indian players to increase both their productivity and competitiveness.
  • In addition, the government needs to carefully evaluate the various trade agreement opportunities Bangladesh and Vietnam benefit from favourable access to some of the big apparel markets.
  • The government also needs to re-look at fibre neutrality and evaluate various trade agreement opportunities, while domestically focusing more on technology upgradation and skill development.

Conclusion:

There is a need to expand the production base to non-traditional areas where abundant land and labour are available.