June 2016 Government of India Employment Generation & Promotion of Exports in Textile & Apparel Sector 1

Outline I.Export & Employment Potential II.Decisions – Production / Employment Incentives – Labour Productivity Incentives – Tax Incentives 2

Sector’s Potential Incomparable employment potential of garmenting sector Every 1 crore rupees of investment – generated a minimum of 70 jobs in garmenting sector – as compared to 10 persons in steel & 25 persons in automobile sector Presence of the entire value chain in India – from fibre to apparel manufacturing China ceding space due to – focus on high technology sectors; and – rising wage costs 3

Source: Calculations based on data published by Office of Textile Commissioner and industry estimates CurrentPotentialAdditional Employment Generation31.9 Million56.9 Million25 Million ExportsUS$ 40 bn.US$ 57 bn.US$ 17 bn. *Investment required to balance the value chain = US$ 30 bn. Sector’s Potential

Apparel exports of Bangladesh and Vietnam have surpassed India’s apparel exports India was the clear leader from 1995 to 2000 Bangladesh’s apparel export exceeded that of India in 2003 Vietnam’s apparel export exceeded that of India in 2011 Bangladesh India Vietnam Today India is the smallest apparel exporter among 3 Data Source: UN Comtrade With policy support, India can again regain its position in next 3 years Projections

Production & Employment Incentives and Labour Reforms

Decision: Additional Employment in Garment Manufacturing Sector – Tax and Production Incentives Reduction in number of working days from 240 to 150 under section 80JJAA of Income Tax Act ; Additional 10% ATUFS subsidy for garmenting : Scheme for three years – In additional 15% being given at present – Based on additional production and employment generated after a period of 3 years; Government to bear entire 12% of Employee Provident Fund Scheme contribution of employer – including balance 3.67% contribution – For all new employees enrolling in EPFO, for first three years; with salary up to Rs. 15,000 per month – Bringing employees to formal sector Impact in three years : →Increase in exports by 2.6 billion US$ →increase in employment by lakhs →increase in investment by 7 billion US$ 7

Decision : Flexibility in Labour Laws to increase Productivity Overtime hours for workers not to exceed 8 hours per week in line with ILO norms – Increased earnings to workers Introduction of Fixed Term Employment under Sub section 1 (15) of the Industrial Employment (Standing Order) Act, 1946 – Benefits of regular employment Making employees contribution to EPF optional for employees earning less than Rs 15,000 per month – Additional take home wages to employees; option of choice Impact in three years : →Increase in exports by 1.4 billion US$ →increase in employment by 1.75 lakhs →increase in investment by 4.2 billion US$ 8

Tax Issues

Decision : Additional Incentives under Duty Drawbacks for Garments Special scheme for remission of State levies by Ministry of Textiles for three years Rebate to be worked out by Drawback Committee Net additional outflow approximately Rs crores Drawback at All Industries Rate should be given even when fabric inputs are imported under Advance Authorization Scheme AIR to be worked out by Drawback Committee Impact in three years : →Increase in exports by 9.5 billion US$ →increase in employment by 9.5 lakhs →increase in investment by 2.7 billion US$ 10

Summary – 3 year Impact 11 Segment / InterventionAnnual outgo Additional Investment (US$ bn.) Total Employment Direct & Indirect (Lakhs) Additional Exports (US$ bn.) Measures to Enhance Competitiveness of the Apparel Industry NIL NIL JJAA Amendments Rs crores Additional TUFS for garmenting Additional 3.67% EPF contribution Additional 5% duty drawback for garments Rs. 5,500 crores Labour law reforms NIL Direct employment :upstream (yarn, fabric & processing) Indirect employment* (1:1.3) Total Rs. 6,000 crores

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