Exports from key manufacturing sectors, including textiles, leather, and gems and jewellery, have continued to show low growth in 2017-18. The Centre is banking on these sectors to create a large number of jobs.
Even though such sectors have managed to recoup their losses from previous years, they continued to see a much lower export growth rate in a year when India’s outbound trade managed to rise above the $300 billion target after two years, spurred by a rise in global demand, official data showed.
Successive economic surveys have stressed on the need for policy reforms in these sectors. According to rating agency CRISIL, comparative advantage (RCA), or the competitiveness of these labour intensive sectors, has been on a sequential decline. A case in point, the RCA witnessed a significant decline for three of these sectors during 2006 to 2016.
The textile tangle
The $36 billion textile export sector, the third largest foreign exchange earner for the country after petroleum products and gems and jewellery, clocked only 0.75 per cent growth in 2017-18, after a contraction in the past two years. In the last financial year, apparel manufacturing, the largest segment within textiles, registered a decline for the 11th straight month till March 2018.
“These figures indicate an ongoing shrinkage in the industry, which is a cause for concern. The sector currently employs 12.9 million workers, and the ongoing slide has hit several clusters. While India is struggling with the problem of stagnation in exports, countries such as Bangladesh and Vietnam are showing growth in apparel exports,” said HKL Magu, chairman, Apparel Export Promotion Council.
Unresolved issues, including the reduction in duty drawback after the imposition of GST and capital blockage due to slow refunds have affected growth estimates, experts said.
The labour-intensive apparel segment is doing quite badly. This is a very disturbing feature because despite the contraction in the sector, India’s exports have grown. Currency has also been a big issue. The rupee was trading at around 68 per US dollar in March and then it came down to sub-64 levels,” said Sanjay Jain, chairman, Confederation of Indian Textile Industry.
In fact, GST aftershocks have been felt across sectors.
The $23 billion transport equipment segment saw its growth rate plunging from more than 8 per cent in 2016-17 to 1.31 per cent in 2017-18. According to industry insiders, smaller firms reduced output to avoid defaulting on their loans, which hit the sector.
The GST has also affected the leather sector, where informal business chains have traditionally relied on cash transactions. Also, the crackdown on the cattle trade in Uttar Pradesh, the epicentre of the leather industry, has hit the sector hard.
Gold loses shine
In the gems and jewellery sector, the clampdown on loans by public sector banks following the Nirav Modi scam has affected the sector. “We are awaiting details on the gold policy,” a senior functionary from the Gems and Jewellery Export Promotion Council said. The government last year banned the export of gold products with purity above 22 carats, to reduce irregularities in trade.