The deferral of the Goods and Services Tax (GST) Council’s decision to fix the tax rate for textiles and apparel at the June 3, 2017, meeting did not come as a surprise to the industry. The decision requires further deliberations; it would have an impact not only on consumers but also on the millions of workers employed.
The textile and apparel sector plays a critical role in the Indian economy. Its share to GDP and exports are 6 per cent and 13 per cent, respectively. The sector is the second largest employer, with direct employment of over 50 million and indirect employment of over 60 million people. The apparel sector is 80-fold more labour intensive than the automotive industry and 240-fold more intensive than the steel sector. The sector is also a vehicle of social transformation, especially for women.
Globally, India has an opportunity to ride the growth wave through the textile and apparel sector, with China losing the market share due to rising wage levels. However, the space vacated by China is being taken over by countries like Bangladesh, Cambodia and Vietnam. Here, India has a comparative advantage in terms of abundant labour at competitive prices, as well as a large domestic market base.