Name : Harshit Rathore

Roll No. : FT-2K22-26

MBA (M.S) 2Yr. 2nd Sem
Macro economics project on textile industry

The Impact of Monetary and Fiscal Policy On -

The Indian Textile Industry

Monetary Policy –

It is a financial tool that is used by the central bank (rbi) in regulating the flow
of money in the economy. the central bank can use tools such as open market
operations, reserve requirements, and discount rates to influence the economy.
The primary goal of monetary policy is to maintain price stability while
pursuing growth. Price stability is an essential prerequisite to sustainable
growth.
Monetary policy instruments or instruments of credit control are used by RBI to
regulate magnitudes such as interest rates, money supply & availability of credit
with a view to achieve the ultimate objective of economic policy.

The RBI on 6 April released its monetary policy report for April 2023. This is
the 1st bi monthly policy for 2023-2024.

Policy Repo Rate : 6.50%

Standing Deposit
: 6.25%
Facility Rate
Marginal Standing
: 6.75%
Facility Rate
Bank Rate : 6.75%
Fixed Reverse Repo
: 3.35%
Rate
CRR : 4.50%
SLR : 18.00%
Bank Rate: 6.75 | Repo Rate: 6.50 | SDF Rate: 6.25 | MSF Rate: 6.75 | Cash
Reserve Ratio: 4.50 | Statutory Liquidity Ratio: 18.00 | WPI Inflation: 1.34
(Mar-23) | CPI Inflation: 5.66 (Mar-23)

RBI’s Monetary Policy (Bimonthly Monetary Policy) on

6 April 2023 –

. RBI keeps repo rate unchanged at 6.50%.

. Inflation at 6.44% in February compared to 6.52 in the month of
January.
. RBI projected 5.2% inflation for FY24.
. GDP Growth projection for FY24 marginally raised to 6.5%
. Economic activity remains resilent.
. Global Economy facing financial challenges in wake of recent
bank failure.
. RBI is keeping a close watch on turmoil in banking sector in
developed countries .
. Inward remittances touch all-time high of $107.2 Billion in 2022.
. RBI to maintain agile approach for liquidity management.
. India’s banking & non-banking financial system remains healthy.
. RBI to set up centralised portal to search across multiple banks
for unclaimed deposits.
Fiscal Policy –

It is a financial tool that is used by the central government in managing tax

revenues and policies related to expenditure for the benefits of the economy.
The government can increase spending and lower taxes to stimulate economic
growth, or decrease spending and raise taxes to reduce inflation.

Continuing the path of fiscal consolidation, the Government intends to bring the
fiscal deficit below 4.5 per cent of GDP by 2025-26. This was stated by the Union
Minister for Finance and Corporate Affairs Smt. Nirmala Sitharaman while
presenting the Union Budget 2023-24 in the Parliament today.

The Finance Minister further stated that the fiscal deficit is estimated to be 5.9
per cent of GDP in BE 2023-24. To finance the fiscal deficit in 2023-24, the net
market borrowings from dated securities are estimated at Rs. 11.8 lakh crore. The
balance financing is expected to come from small savings and other sources. The
gross market borrowings are estimated at Rs. 15.4 lakh crore.

In Budget Estimates 2023-24, the Finance Minister stated that the total receipts
other than borrowings and the total expenditure are estimated at Rs. 27.2 lakh
crore and Rs. 45 lakh crore respectively. Moreover, the net tax receipts are
estimated at Rs. 23.3 lakh crore.

In the Revised Estimate 2023-24, the Finance Minister stated that the total
receipts other than borrowings is Rs. 24.3 lakh crore, of which the net tax receipts
are Rs. 20.9 lakh crore. The Revised Estimate of the total expenditure is Rs. 41.9
lakh crore, of which the capital expenditure is about Rs. 7.3 lakh crore. The
Revised Estimate of the fiscal deficit is 6.4 per cent of GDP in RE 2022-23,
adhering to the Budget Estimate.
 FISCAL DEFICIT TO BE AT 5.9%IN
FY 2023-24

. REVENUE DEFICIT TO BE AT 2.9 % IN FY 2023-

24

. FISCAL DEFICIT ON TRACK TO REACH

BELOW 4.5% BY FY 2025-26

. 15.5 % Y-O-Y GROWTH IN GROSS TAX

REVENUE IN 2022-23 OVER 2021-22

. DIRECT TAXES GREW AT 23.5% IN FIRST 8

MONTHS OF FY 2022-23

. INDIRECT TAXES GREW AT 8.6% DURING THE

SAME PERIOD

. STATES TO BE ALLOWED A FISCAL DEFICIT

OF 3.5 PER CENT OF GSDP

. STATES TO BE PROVIDED A FIFTY-YEAR

INTEREST FREE LOAN.
 SOME GLIMPSES OF THE NEW UNION BUDGET 2023

Union Budget 2023–24 builds on the vision set out in the previous budgets and provides a
blueprint for steering the economy towards a sustained high-growth trajectory. The Union
Minister of Finance and Corporate Affairs Ms. Nirmala Sitharaman presented the Union
Budget 2023-24 in Parliament on 1st February 2023.

Key Highlights of the Budget:

 Per capita income has more than doubled to Rs.1.97 lakh (US$ 2,400) in around nine years.

 Indian economy has increased in size from being 10th to 5th largest in the world in the past
nine years.

 EPFO membership has more than doubled to 27 crore.

 7,400 crore digital payments of Rs.126 lakh crore (US$ 1,535.7 billion) have taken place
through UPI in 2022.

 11.7 crore household toilets constructed under Swachh Bharat Mission.

& 9.6 crore LPG connections provided under Ujjwala.

 220 crore covid vaccination of 102 crore persons.

 47.8 crore PM Jan Dhan bank accounts.

 Insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana.

 Cash transfer of Rs. 2.2 lakh crore (US$ 26.8 billion) to over 11.4 crore farmers under PM
Kisan Samman Nidhi.

 Targeted Fiscal Deficit to be below 4.5% by 2025-26.

 The maximum deposit limit for Senior Citizen Savings Scheme to be enhanced from Rs. 15
lakh (US$ 18,276.5) to Rs. 30 lakh (US$ 36,553).

 ‘Effective Capital Expenditure’ of Centre to be Rs. 13.7 lakh crore (US$ 167.26 billion).

 More than 39,000 compliances reduced and more than 3,400 legal provisions decriminalized
to enhance Ease of Doing Business.

 Jan Vishwas Bill to amend 42 Central Acts have been introduced to further trust-based
governance.

 PAN will be used as the common identifier for all digital systems of specified government
agencies to bring Ease of Doing Business.
  A brief Introduction OF THE TEXTILE
INDUSTRY

The Indian textile industry is one of the largest producer of textiles in the
world with a large unmatched raw material base and manufacturing strength
across the value chain. The industry includes extreme variety of both hand-spun and
hand-woven textiles sectors and the capital-intensive sophisticated mills sector.
The decentralised power looms/ hosiery and knitting sector forms the largest
component in the textiles sector. The formulation of policy, planning, development,
export promotion and regulation of the textile industry in India is administered
under Ministry of Textile, Government of India.

India’s textiles industry has around 4.5 crore employed workers including 35.22 lakh
handloom workers across the country.

MARKET SIZE-
THE INDIAN TEXTILE AND APPAREL INDUSTRY IS
EXPECTED TO GROW AT 10% CAGR FROM 2019-20 TO
REACH US$ 190 BILLION BY 2025-26. INDIA HAS A 4%
SHARE OF THE GLOBAL TRADE IN TEXTILES AND
APPAREL.
 Significance of Textiles Sector
of India :
. INDIA IS THE 2ND LARGEST MANUFACTURER AND EXPORTER IN THE WORLD,
AFTER CHINA.

. THE SECTOR CONTRIBUTED 12% TO INDIA’S EXPORT EARNINGS IN FY20.

. IT CONTRIBUTED 13% OF THE INDUSTRY PRODUCTION IN FY20.

. TEXTILES INDUSTRY HAS AROUND 4.5 CRORE EMPLOYED WORKERS INCLUDING

35.22 LAKH HANDLOOM WORKERS ACROSS THE COUNTRY.

. THE DOMESTIC TEXTILES AND APPAREL MARKET STOOD AT AN ESTIMATED

US$ 100 BILLION IN FY19.

. INDIA HAS A SHARE OF 5% OF THE GLOBAL TRADE IN TEXTILES AND APPAREL.

. IT CONTRIBUTED 2.3% TO THE GDP OF INDIA AND EMPLOYED MORE THAN 45

MILLION PEOPLE IN FY20.

. TRADITIONAL SECTORS CONTRIBUTE TO MORE THAN 75% OF TOTAL TEXTILES

PRODUCTION IN THE COUNTRY.

. THE TEXTILES SECTOR HAS WITNESSED A SPURT IN INVESTMENT DURING THE

LAST FIVE YEARS.

. THE INDUSTRY (INCLUDING DYED AND PRINTED) ATTRACTED FOREIGN DIRECT

INVESTMENT (FDI) WORTH US$ 3.45 BILLION FROM APRIL 2000 TO JUNE 2020.
Monetary and Fiscal Policy Impact on
Textile Industry :-
Monetary policy refers to the actions taken by the central bank of a
country to regulate the money supply and interest rates. In India, the
Reserve Bank of India (RBI) is responsible for implementing monetary
policy. The RBI has implemented various measures to support the
economy and provide relief to businesses and individuals affected by
the COVID-19 pandemic. These measures have had a significant
impact on the textiles industry.

One of the significant impacts of monetary policy on the textiles

industry is the availability of funds. Lower interest rates make it
easier for textile companies to secure funding, as the cost of
borrowing decreases. This can also lead to increased investments in
the textiles industry, which can drive economic growth. The RBI has
implemented several measures to provide liquidity support to the
banking system, which has helped to increase the availability of funds
for textile companies.

Another impact of monetary policy on the textiles industry is the

exchange rate. A weaker currency can make it more expensive to
import raw materials for textile production. However, a weaker
currency can also make exports more competitive, which can benefit
the textiles industry. The RBI has implemented various measures to
manage the exchange rate, including buying and selling foreign
currency in the market. The Currency is also devalued by a fall of
9.5% .
Production of fibre in India reached 2.40 MT while for yarn, the
production stood at 4,762 million kgs during the same period.
Natural fibres are regarded as the backbone of the Indian textile
industry, which is expected to grow from US$138 billion to US$195
billion by 2025.

India’s textile and apparel exports (including handicrafts) stood at

US$ 44.4 billion in FY22, a 41% increase YoY. During April-October in
FY23, the total exports of textiles stood at US$ 21.15 billion. India’s
textile and apparel exports to the US, its single largest market, stood
at 27% of the total export value in FY22. Exports of readymade
garments including cotton accessories stood at US$ 6.19 billion in
FY22.

India’s textiles industry has around 4.5 crore employed workers

including 35.22 lakh handloom workers across the country.
 THE INVESTMENTS IN TEXTILE INDUSTRY IS INCREASED DUE TO
THE LOWER INTEREST RATES ON SECURE FUNDING WHICH
REDUCES THE COST OF BORROWING.

 SUCH POLICIES ALSO AFFECTS THE EXCHANGE RATE. A WEAKER

CURRENCY MAKES IMPORT OF RAW MATERIALS EXPENSIVE AND
EXPORT MORE COMPETITIVE.

 INDIA SCALED ITS HIGHEST EVER EXPORTS AT US$44.4 BN IN

TEXTILES AND APPAREL INCLUDING HANDICRAFTS IN FY2021-22.
EXPORTS OF READYMADE GARMENTS INCLUDING COTTON
ACCESSORIES STOOD AT US$ 6.19 BILLION IN FY22.

 THE INDIA’S EXPORTS IS PROJECTED AROUND 145.6 $ BN IN 2023

IN THE WORLD’S EXPORT.

 100% FDI IS ALLOWED IN TEXTILES IN ORDER TO INCREASE THEIR

PRODUCTION CAPACITY.
  THE GOVT. HAS ALSO PROVIDED HUGE FUNDS IN THE UNION
BUDGET 2023-24 TO THE TEXTILE SECTOR IN ORDER TO
ENCOURAGE MORE PRIVATE EQUITY INVESTMENTS AND HELPS IN
GENERATING MORE EMPLOYMENT OPPORTUNITIES.

CHALLENGES IN THE TEXTILE SECTOR-

. Shortage in supply of raw material

. Increase in cost of raw material

. Pressure to meet stringent social and environmental norms

. Infrastructure bottlenecks

. Uneven regional development

. Lack of efficiency due to manual work

. Unorganized weaving sector

The Government Initiatives taken to facilitate the
Textile Industry -
 GOVERNMENT HAS ALLOWED 100% FDI IN THE SECTOR UNDER THE AUTOMATIC
ROUTE.
 AN MOU WAS SIGNED BETWEEN TEXTILE COMMITTEE, INDIA AND M/S NISSENKEN
QUALITY EVALUATION CENTRE, JAPAN, FOR IMPROVING QUALITY AND TESTING
INDIAN TEXTILES AND CLOTHING FOR THE JAPANESE MARKET.
O THIS INDIA-JAPAN PACT ON COOPERATION IN TEXTILES WILL FACILITATE
INDIAN EXPORTERS TO MEET THE REQUIREMENTS OF JAPANESE
IMPORTERS AS PER THE LATTER’S TECHNICAL REGULATIONS.
 A NATIONAL TECHNICAL TEXTILES MISSION IS PROPOSED FOR A PERIOD FROM
2020-21 TO 2023-24.
 THE NEW TEXTILES POLICY 2020 FOR OVERALL DEVELOPMENT OF THE SECTOR WAS
RELEASED BY MINISTRY OF TEXTILES.
 CABINET COMMITTEE ON ECONOMIC AFFAIRS (CCEA) APPROVED MANDATORY
PACKAGING OF FOOD GRAINS AND SUGAR IN JUTE MATERIAL FOR THE JUTE .
 AMENDED TECHNOLOGY UP-GRADATION FUND SCHEME (A-TUFS), ESTIMATED TO
CREATE EMPLOYMENT FOR 35 LAKH PEOPLE AND ENABLE INVESTMENT WORTH
RS. 95,000 CRORE .
 INTEGRATED WOOL DEVELOPMENT PROGRAMME (IWDP) TO PROVIDE SUPPORT
TO THE WOOL SECTOR, STARTING FROM WOOL REARER TO END CONSUMER, WITH
AN AIM TO ENHANCE QUALITY AND INCREASE ITS PRODUCTION
 THE CABINET COMMITTEE ON ECONOMIC AFFAIRS (CCEA), APPROVED A NEW SKILL
DEVELOPMENT SCHEME NAMED 'SCHEME FOR CAPACITY BUILDING IN TEXTILE
SECTOR (SCBTS)'.
 THE FOLLOWING GOVERNMENT POLICIES ARE FAVOURABLE WHICH PROVIDE
ATTRACTIVE INCENTIVES TO THE MANUFACTURERS:
O SCHEME FOR INTEGRATED TEXTILE PARKS (SITP)
O INTEGRATED SKILL DEVELOPMENT SCHEME (ISDS)
O TECHNOLOGY MISSION ON TECHNICAL TEXTILES (TMTT)
O SWARNJAYANTI GRAM SWAROZGAR YOJANA (SGSY)
O INTEGRATED PROCESSING DEVELOPMENT SCHEME (IPDS)
O MERCHANDISE EXPORTS FROM INDIA SCHEME (MEIS)
ADVANTAGE INDIA
ROBUST
DEMAND

*India’s textile and apparel exports (including handicrafts) stood at US$ 44.4 billion in FY22, a
41% increase YoY. Exports of readymade garments including cotton accessories stood at US$
6.19 billion in the end of FY22.

COMPETITIVE
ADVANTAGE

*India enjoys a comparative advantage in terms of skilled manpower and in cost of production,
relative to major textile producers.

*In June 2022, Minister of Textiles, Commerce and Industry, Consumer Affairs & Food and
Public Distribution, Mr. Piyush Goyal, stated that the Indian government wants to establish 75
textile hubs in the country.

POLICY
SUPPORT

*100% FDI (automatic route) is allowed in textiles.

*Production-linked Incentive (PLI) Scheme worth Rs. 10,683 crore (US$ 1.44 billion) for
manmade fibre and technical textiles over a five-year period.

*The Indian government has notified uniform goods and services tax rate at 12% on man-made
fabrics (MMF), MMF yarns and apparel.

INCREASING
INVESTMENTS

*Huge funds in schemes such as Rs. 900 crore (US$ 109.99 million) for Amended Technology
Upgradation Fund Scheme (ATUFS) have been released by the Government in the union budget
of 2023-24 to encourage more private equity investments and provide employment.
 -> Benefits of Make in India in Textile Sector –

. The ambitious ‘Make in India’ scheme is proving boon to the textile sector.
. With increased penetration of organized retail, favourable demographics
and rising income levels are expected to drive textile demand.

. Significance: Since the start of this initiative the textile sector growth is
expected to grow almost double than the current scenario.

-> Role of Textile Sector’s in Aatmanirbhar Bharat:

 The textile sector is a "key sector" that will help in building a

self-reliant India.
 Textile traditions showcase powerful ideas and
principles like diversity and adaptability, self-reliance, skill and
innovation and these principles have become even more
relevant now.
 The government is planning to develop a large world class
textile infrastructure in the country in the form mega textile
parks.
 The mega textile parks will encompass a complete value chain
of this sector.
 The government is planning to promote naturally used products
like bamboo and high-performance value-added fibres and their
products.
 For execution lots of planning like providing credit at
concessional rates through interest subvention schemes, credit
guarantees, margin money subsidy and large warehouse
infrastructure near all ports are in discussion.
 Technical textiles are another important element. This segment
caters to the sectors like automobiles, medical, sports,
agriculture and industries.
CONCLUSION :

Monetary and fiscal policies have a significant impact on the

textiles industry in India. Lower interest rates and increased
government spending can provide relief to textile companies
affected by the pandemic and help to drive economic growth. Tax
incentives can also help to increase the competitiveness of the
textiles industry and encourage exports. However, challenges
remain, including supply chain disruptions, labor shortages, and
competition from other countries. It is crucial for the government
and industry players to work together to address these challenges
and ensure the long-term sustainability of the textiles
industry in India.