Apparel industry to see Rs 5,000 crore investment this year: AEPC

Apparel industry body AEPC is expecting around Rs 5,000 crore fresh investments into the sector during the current fiscal which may create as many as two million jobs.

Describing the Rs 6,000-crore textile booster package announced by the government late last month as a “game-changer,” Apparel Export Promotion Council (AEPC) chairman Ashok G Rajani told PTI that based on the initial feedback he has received, around Rs 5,000 crore may flow into the industry in fresh capex this fiscal year itself.

This additional investment into the apparel sector, which has not seen any investments for years, alone can create as many as two million jobs this year, he said, adding that the impetus will be on the near-doubling of the capital subsidy to 25% of one’s investment.

When asked whether the industry will be able to meet the government’s target of creating 10 million jobs and $30 billion in export earnings by 2020, Rajani said, “Without any doubt, it is very much doable.

“In fact, I am optimistic that we should be easily crossing these targets as the entire industry is very happy with the package and bullish on investments. After all, we aren’t capital-intensive industry but highly labour-intensive on.”

Rajani, who runs a company called Flair Exports, said his company will be setting up a new factory this year itself and is scouting for the right location. The factory will be in Navi

Mumbai and he needs Rs 6-7 crore to open the new factory with 250 machines.

“We will hire 300 more people for this factory to add to our 750 hands now,” he said.

When asked how the scheme will help raise exports, he said the six percentage points margins that will come from the package will help him grow by at least 25% to Rs 75 crore from the present Rs 60 crore.

He, however, said the 9.5% duty on exports is still a worry, which competitors from Vietnam, Bangladesh and Cambodia don’t pay.

He said the enhanced duty drawback of 12.25%, up from 7.25%, is the biggest takeaway from the package which leaves the ball in the court of the industry as the government has given it the best deal possible.

The Cabinet, on June 22, cleared a Rs 6,000-crore incentive package for the textiles and apparel sector to create one crore new jobs over the next three years, and attract investments worth $11 billion and generating $30 billion in exports.

The new measures include additional incentives for duty drawback scheme for garments, flexibility in labour laws to increase productivity as well as tax and production incentives for job creation in garment manufacturing.

“Over the last few years, apparel manufacturing had shifted to countries like China, which had cost advantages.

But China’s cost advantage has been neutralised to some extent because of increase in labour wages. We have advantages of economies of scale,” he said.

Textiles Secretary Rashmi Verma had said the package will result in additional investments worth $1 billion, create one crore new jobs and increase exports to $30 billion.

A recent BCG report said that the textile and apparel sector can triple in size to $150 billion and create 50 million jobs by 2025.

The study estimates that the industry can triple in size over the next 10 years, get $150 billion annually in foreign exchange and spur the apparel, made-ups and textile industry to reach $300 billion by 2025.

The domestic market will grow at least 2.5 times to around $150 billion in size, it said, adding that since China is no longer a cheap market for manufacturers, this can create a potential market of over $280 billion for other countries.