The Bombay Sensex crossing the historic 25000-point mark for the first time in the stock market history and now hovering around 25500, and the rupee value against the dollar appreciating to touch a high of 59.80 after the new Modi-led UDF Government assumed power at the Centre are clear reflection of the corporate sector hope and confidence that the economy is in for a thorough transformation. True, the BJP election manifesto promised a number of proactive measures towards speedier growth by reining in inflation and through fiscal consolidation, boost to manufacturing, additional investments in major industry sectors, and by allowing FDI in all areas, particularly infrastructure.
Though industry in general is upbeat over the emerging scenario with a fair appreciation in the rupee value, exporters in general have their own reservations on the prospects ahead. It is feared that the rise in rupee value would make the textile sector, which accounts for over one-third of the overall exports from the country, uncompetitive in the global market at a time when the US and the EU, together importing almost 60 per cent of their textile requirements from India, tend to move to India’s rivals like Bangladesh, China, Indonesia and Pakistan whose currencies remain unchanged. Even otherwise, both of them have already started opting for goods from countries in close proximity to them. Further, India is now facing stiffer competition from China and other neighbouring countries. The situation is really grim with the overall export prospects getting dimmer.
Now all eyes are on the forthcoming Union Budget. With the emergence of India as a strong economic power attracting worldwide attention and having its footprints in multiple fields, it is but natural and essential for the Finance Minister, Mr. Arun Jaitley, to come up with excise and customs reliefs as well as special initiatives to stabilise the textile sector popularly known as ‘sunrise industry’. Besides restoring the TUFS with additional funds, the erstwhile UPA government had made a special allocation of Rs. 700 crores last year for development of technical textiles. This is not enough. CITI and AEPC are, however, of the firm view that the revised 12th Plan textile export target of $50 billion is difficult to attain without further diversification of products and offer of additional tax incentives for the sector. The Reserve Bank and the Finance Ministry, on their part, could jointly consider several measures like selling dollars to check further appreciation of the rupee and, in the process, halt a possible fall in textile exports. Let us wait and see what the Finance Minister has up his sleeves.