A ₹ 6000 crore robbery – Why cheering growth of textile exports is heavily misguided

Just a day after the Economic Survey of India 2017-18 was released, commentators and editorials showered praise on the government for doling out a package worth ₹ 6,000 crore to the textile industry in June 2016. Swarajya magazine claimed that the measure “provided an impetus to the exports of readymade garments of man-made fibres”, while Business Standard highlighted that when properly implemented, “incentive packages play a vital role in boosting export growth”. The package for the apparel and ready-made garment industry was announced to help exporters become competitive in the international markets and create domestic jobs in the labour intensive textile sector. It reportedly boosted the apparel exports from India by 16%.

 

While the package lowered the price of Indian made clothes in the international market, its impact on job creation and earning foreign capital is negligible. The Economic Survey fails to mention the exact number of jobs created. Most of the benefits of such incentives go to already established businesses that choose to expand their production with the existing workforce or only a few new employees. Since textiles account for only 13 percent of India’s exports, its potential for earning foreign capital remains considerably low. Moreover, the Reserve Bank of India already holds more than $400 billion of foreign reserves that are more than sufficient to meet our external obligations.

While misguided commentators applaud the government’s policy, we must know what it really is – a subsidy to people in rich countries who can now buy cheaper Indian made clothes at the expense of poor Indian taxpayers. Simply speaking, consumers in rich countries are paying ₹ 6,000 crore less for Made in India clothes, and this money has come directly from the Indian taxpayers. Even if all of the subsidies were not passed to the consumers in rich nations, a few big textile exporters benefitted at the cost of all Indians.

Instead of wasting ₹ 6,000 crore to create a few jobs, the government should use its limited resources in providing essential services to the people such as maintenance of law and order, national defence and providing public infrastructure.