Given the backdrop of evolving geopolitics in the context of the Trump administration, where tariffs are the elephant in the room and a slowdown has been witnessed in the domestic market where we have started to see muted discretionary spending, the Indian apparel sector is posed with multiple headwinds, primarily revolving around high working capital needs and competitive pressures, persistent inflationary spends, and to address these real issues, 'CMAI' has proposed pre-budget recommendations for the Union Budget 2025-26.
Critical need for the ease of financial burden:
Interest Subvention: Advocacy for the supportive policy in the form of implementing a government-supported interest subvention scheme, mirroring the agriculture sector's Priority Sector Lending (PSL) rate.
This will catalyze reduced borrowing costs for businesses, easing their financial constraints and helping them navigate difficult times.
Consolidating MSME Resilience:
Secured Creditor Status: To help build MSME resilience, it can be a lifeline by granting MSMEs secured creditor status in National Company Law Tribunal (NCLT) cases, giving timely impetus. The hack of financial security can be a life changer, improve recovery rates, and harness a more conducive business environment aligned with their business interests.
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Need to Bolster Manufacturing: New playbook
Expanded PLI Scheme: Extend the Production Linked Incentive (PLI) scheme to encompass all garment categories, boosting manufacturing of garments per se. This is going to go a long way in encouraging & revving India's global export competitiveness, neutralizing the advantages enjoyed by our competitors/competing countries, and attracting more and more investments in the sector to give impetus to apparel exports.
Addressing the 43B(H) Clause: Old worries
Gradual Relaxation: Broadly mentioning the amendment to the 43B(H) clause has adversely impacted the garment industry. A gradual reduction in payment cycles to 45 days over three years is recommended, along with the inclusion of the "Medium" segment within the purview of the clause.
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Guardrails Around Local Industry:
The review of FTA with Bangladesh has been urged: Hurting domestic apparel industry
Unrestricted flow of imports from Bangladesh poses a real threat to the domestic industry. There is a case for a comprehensive review of the Free Trade Agreement (FTA) with Bangladesh, which is imperative to ensure a level playing field as it is a flux situation.
Trade experts unequivocally urge that 'duty-free imports (DFI)' should be plausibly restricted to apparel manufactured using Indian fabrics.
These bunch of aforementioned recommendations are being proposed to nurture a credibly sustainable and globally competitive Indian garment industry, enabling it to contribute reasonably to the economic growth and job creation.