Rethinking India’s Textiles PLI Scheme: Building a Stronger Foundation for Exports and Jobs
India's textiles industry, the second-largest employer after agriculture with 4.5 crore workers, has faced stagnation over the past few years. In 2024, the country's textile exports stood at $34 billion, down significantly from $41 billion in the previous year. This decline has contributed to broader challenges, including rising unemployment, as the sector accounts for 13% of India's industrial production and provides livelihoods to millions of families. The government, having recognized this issue, has set ambitious goals: reaching $100 billion in exports by 2030 and creating an additional 6 crore jobs in the sector over the next decade.
With PLI benefits – representing significant fiscal commitment – yet to flow, the introduction of short-term import restrictions suggests potential gaps in the PLI scheme's coverage.
PLI Scheme for Textiles: A review
Central to this transformation is the Production Linked Incentive (PLI) scheme for textiles, launched in September 2021 with an outlay of ?10,683 crore. The scheme primarily focuses on man-made fibers (MMF), MMF apparel, and technical textiles, areas where India aims to build global competitiveness. With 64 approved applicants proposing investments of ?20,000 crore, the scheme projects a turnover of ~?2 lakh crore. However, tangible benefits are yet to materialize, with first disbursements scheduled to begin only in the later half of FY25.
The PLI scheme's structure supports both intermediate producers (yarn and fabric manufacturers) and finished goods manufacturers. For instance, a polyester shirt's value chain would benefit at multiple stages: from the production of polyester fibers to yarn spinning, fabric weaving, and finally, garment manufacturing.
The sector's structure demands a more nuanced policy approach. A review of the Textiles PLI scheme's parameters, especially entry criteria and benefit distribution, could ensure better alignment with industry realities.
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Policy Coordination Challenges
In a parallel development, the government is considering imposition of Minimum Import Prices (MIP) on certain textile intermediates, particularly targeting synthetic and MMF imports. This comes as China dominates several import categories – for instance, 99% of viscose rayon yarn and 93% of MMF pile fabrics – and is resorting to dumping of these materials to upset the domestic industry. While this move aims to protect domestic manufacturers and address India's growing trade deficit with China, which has reached $40B in the first 5 months of this FY, it creates a complex policy scenario for the textile industry.
The timing raises questions about policy coordination. With PLI benefits – representing significant fiscal commitment – yet to flow, the introduction of short-term MIP measures suggests potential gaps in the PLI scheme's coverage. The scheme's high entry barriers, including substantial investment requirements, may have inadvertently excluded smaller players who form the backbone of India's textiles ecosystem.
The sector's structure demands a more nuanced policy approach. A review of the Textiles PLI scheme's parameters, especially entry criteria and benefit distribution, could ensure better alignment with industry realities. The focus should be on creating an inclusive growth framework that supports both large-scale manufacturers and smaller units that collectively drive the sector's competitiveness.