10 February 2024, Mumbai
Challenges, Gains, and the Road Ahead
In September 2021, the government's Production Linked Incentive (PLI) scheme aimed to propel domestic manufacturing faced a mixed reception in India's textile and apparel industry.
While ambitious, the scheme encountered sluggish adoption by industry players, prompting questions about its efficacy in this critical sector.
PLI in Textiles: A Hopeful Start with Hurdles
Launched with a promise of Rs 10,683 crore incentives over five years for investments in man-made fiber (MMF) apparel, fabrics, and technical textiles, the PLI scheme aimed to attract Rs 19,000 crore in investments and boost production by Rs 3 lakh crore. Initially, positive responses from major players like Reliance Industries and Welspun were overshadowed by implementation challenges and industry concerns.
As of January 2024, only a few companies applied, with slow disbursement of incentives. Fashion designer Anita Dongre noted the initial focus on MMF, neglecting cotton and home textiles, essential components of the industry.
Factors Contributing to Slowdown
Several factors hindered PLI adoption in textiles:
- Complex Application Process: Described as climbing Mount Everest, the intricate documentation and prolonged approvals pose challenges, particularly for smaller players.
- Stringent Eligibility Criteria:
- High investment thresholds, coupled with post-pandemic uncertainties, deterred potential investors without clear return guarantees.
- Unclear Incentive Structure:
- Ambiguities in incentive calculation and disbursement raised uncertainty, delaying investment decisions.
- Existing Infrastructural Bottlenecks:
- Power shortages, logistics issues, and high import duties on raw materials increased production costs, diminishing the appeal of PLI benefits.
- Limited Scope of PLI-1:
- The initial scheme's focus on MMF and technical textiles excluded major segments like cotton and home textiles, hindering broader industry participation.
PLI in Textiles (as of Jan 2024)
|
Parameter |
Data |
Source |
|
Total Incentive Outlay |
₹10,683 crore |
PIB |
|
Expected Investment |
₹19,000 crore |
PIB |
|
Expected Production Increase |
₹3 lakh crore |
PIB |
|
Applications Received |
Handful |
Industry sources |
|
Incentive Disbursed |
Minimal |
Industry sources |
PLI-2: Addressing Concerns for a Promising Future
PLI-2, launched in December 2023, aims to address industry concerns by expanding its scope to include cotton textiles, home textiles, and select apparel segments.
While PLI-1 faced criticism for excluding these vital segments, PLI-2's broader approach seeks to remedy this. However, challenges persist, especially for smaller players.
The application process and minimum investment thresholds remain complex, making PLI-2's success dependent on effective implementation.
Expert Perspectives on PLI-2
Experts cautiously welcome PLI-2, emphasizing its potential impact but highlighting the need for streamlined processes, timely incentive disbursement, and resolution of infrastructural bottlenecks. Radhika Chopra, an economist, notes that the success of PLI-2 hinges on attracting significant investments, especially in areas like cotton textiles.
To enhance implementation, recommendations include streamlining processes, ensuring transparency in incentive disbursement, addressing infrastructural challenges, and providing support to smaller players.
Learning from Global Examples
India's PLI scheme draws inspiration from initiatives in other countries. China's successful "Made in China 2025" plan and Vietnam's rapid textile industry growth due to free trade agreements offer valuable lessons.
Experts suggest focusing on ethical and sustainable practices, investing in infrastructure, and developing a skilled workforce.
Navigating Challenges for Textile Industry Growth
Challenges (5-6 words):
- Complex process: Mount Everest paperwork
- Strict requirements: High hurdles, low guarantees
- Unclear incentives: Foggy math, delayed decisions
- Existing bottlenecks: Costly constraints, slow infrastructure
- Limited scope: MMF-focused, missing major segments
Crucial to India's economy, the textile and apparel industry requires a well-designed and effectively implemented PLI scheme.
By addressing industry concerns, streamlining processes, and learning from global examples, the government can ensure the PLI scheme contributes significantly to the sector's competitiveness, job creation, and overall growth.
Only then can it truly weave a story of transformation for India's textile industry.
