The rise in disposable income, ranging from approximately Rs 30,000 to over Rs 1,00,000 per year, is expected to significantly boost apparel consumption writes Rahul Mehta
No matter at which end of the political spectrum one is, Budget 25-26 is undoubtedly one of the most welcomed the Government has presented in a long time. The most talked about and cheered decision is the change in income tax slabs and exemption limits.
Of course, the ‘no tax till Rs 12 lakh’ is not as straightforward as it appeared at first sight, there is no doubt that it will put more money in the hands of the consumers, and largely so in the middle class – a segment which has been the most vocal for being the neglected segment of the tax paying population.
An important cause of the slowdown in apparel consumption in the last few years is the reduced amount of disposable income in the hands of consumers for spending on clothing. With this increase in disposable income, ranging from Rs 30,000 odd to over Rs 1,00,000 per year, there is bound to be a huge positive impact on apparel consumption. This is what the industry wanted, and this is what the Finance Minister has provided.
There are of course other minor positives – the increased levels of Income, Rent, etc. over which TDS /TCS has to be deducted, will certainly again result in increased spending. On the Manufacturing side, whilst no direct scheme or measure has been announced, several micro-level changes will provide an impetus to the MSME Sector.
I believe the increased limits to the classification criteria for this sector will have a huge impact – on the positive side. The Investment levels have been increased 2.5 times, and turnover criteria by two times. Now, even an entity with Rs 500 crore will be entitled to MSME benefits
This change will encourage growing enterprises to increase their investments and growth plans without the fear of losing out on the MSME benefits. The Apparel Industry, largely consisting of MSMEs, will hugely benefit from this measure. The increase in guaranteed credit facilities will again provide an impetus to aggressive growth.
I am not commenting on the setting up of the Cotton Mission and the Export Promotion Mission, as their exact roles and responsibilities have not been specified. I just hope they have a clear-cut role to play, and not act as just one more layer of bureaucratic labyrinth.
Equally vague were the assertations of taking measures for the labour-intensive industries – but no specifics were mentioned.
Some of the reductions in the basic customs duties, as in some textile machinery, will also have a positive impact on the Industry. However, the increased duties on some knitted fabrics, will be a double edged sword. On the positive side, it will reduce the chances of under-invoicing and consequent corrupt practices, it will increase domestic prices of raw materials.
I also wish the Finance Minister had used this budget to tweak the Income Tax Act Amendment 43H(b), which has caused more harm to the MSMEs than good. There was a clear case to introduce a staggard credit period instead of the arbitrary 45-day mandate, and to include the medium segment and traders/wholesalers categories in the act, which the Finance Minister failed to do.
All in all, I will give a thumbs up to the budget – but with a clear proviso. Governments are quite known to take from one hand what they have given to the other – I truly hope that this does not happen in this case. The GST rate revision rumours have been around for some time now, and the whole Industry and I fervently hope the GST council does not go ahead with the proposed changes in the slab structures.
Otherwise, all the good steps taken in the budget will be wiped out, and the Government will again conclude that no matter what it does for the industry, it has no effect.
Note : The author of the article, Rahul Mehta is the Chief Mentor at the Clothing Manufacturers Association of India (CMAI). The views expressed in this article are those of the author and do not necessarily reflect the views of the publication.
