Readymade clothes get pricier after Budget
Debdatta Das and Mahek Desai
Thursday, July 09, 2009
(Mumbai)
The Budget was definitely not a please all for several sectors like pharma and shipping. It was a mixed bag for textiles as more excise duty will make polyester, the common man's fabric, expensive on one hand and on the another, it has extended the interest subsidy to March next year.
One must now hold on to that new shirt or the dress that one has recently shopped forโreasonโthe prices of garments, especially polyester makes, are set to rise thanks to the doubling of excise duty on manmade fibres and yarn to 8 per cent and an optional duty of 4 per cent on pure cotton products.
According to industry players, this rise in excise duty will increase costs for manufacturers who in turn will surely pass it on to the consumers.
Bharat Dalal, a fund manager at Dawnaday AV, said, โGlobally, there is more demand for blended fabric than cotton. India falls short in meeting this demand for blended fabric due to excise duty levied on it. Now, with the increase in duty by 100 per cent, it would further aggravate the situation by increasing costs.โ
However, the Budget had some good takeaways for the sector as well. The government heard the industry's crucial demand and extended the existing two per cent interest subvention to March next year.
Prashant Agarwal, MD of Bombay Rayon, said, โThe interest rate subvention has been increased and so that is great. The Export Credit and Guarantee Corporation (ECGC) has also been increased and so there is good news out there.
Well thatโs not all. The government's decision to set up mega handloom clusters in Tamil Nadu, West Bengal and Rajasthan is expected to boost business for these units, who are mostly export oriented and are severely hit by an economic slowdown in the west.
Meanwhile, the budgetary sops may be a beginning by the government to try and resurrect life into this battered industry. All eyes will now be on the EXIM policy, which may offer more relief to the sector.