Friday, March 7, 2008
The 2008 Union Budget: A Textile Perspective
The 2008 Union Budget: A Textile Perspective www.ynfx.com
Capital formation priority as provision for TUFS increased to Rs 1,090 in the next fiscal
The Macro Economics
GDP in the fiscal 2007-08 increased by 9.6% driven by growth in services and manufacturing which are estimated to grow at 10.7% and 9.4% respectively. The growth rate of agriculture for 2007-08 is estimated to by at 2.6%. Saving rate and investment rate is estimated to be at 35.6 % and 36.3% respectively, by the end of 2007-08. FDI amounted to US$12.7 billion and FII to US$18 billion. Reduction of taxes has led to increase in Tax-to- GDP ration set to rise from 12.5% at the end of 2007-08 from 9.2% in 2003-04.
The Textile Industry
The Textile industry has seen a tough fiscal go by and this budget was looked upon for relief. Though the finance minister showed concern for the exporters who are dealing with a strong rupee, nothing new was announced.
No duty-cuts expected by the industry may be disappointing. The National Calamity Contingent duty (NCCD) of PFY which was levied only on PFY has been removed.
There was no change in the peak rate of custom duty, and all other rates for yarns and fiber, textile machinery were left unchanged. General CENVAT rate on all goods is reduced from 16% to 14% to give some stimulus to the manufacturing sector in general.
However there were other positives to cheer the industry. Growth in the capital goods has been impressive at 20.2% and to sustain capital formation in the textile industry, provision for TUFS in textiles has been increased to RS 1,090 crore in 2008-09 from Rs 911 crore in 2007-08.
The Scheme for Integrated Textile Parks (SITP) shall be continued in the 11th plan with the provision of Rs 450 crore in 2008-09. Also, it’s been planned to scale up the production and infrastructure in the six centers of - Varanasi and Sibsagar for Handlooms, Bhiwandi and Erode for powerlooms, and Naraspur and Mooradabad for handicrafts, to see them become mega-clusters. An initial provision of Rs 100 crore has been made with an estimate of Rs 70 crore to be needed for each cluster. Allocations to the Hand loom sector have been increased to Rs 340 crore in the next fiscal.
Coir Boards income has also been exempted from income tax. This may help the Coir Board business, involved in the manufacture of the specialty coir fibre, mostly exported and used for making mats and ropes.
Ultra Mega Power Project (UMPP) in Maharashtra and Tamil Nadu would help in alleviation of the power crises faced by the textile manufacturers.
Key Highlights:
No additional scheme for exports hit by strong rupee.
NCCD of 1% remove from PFY.
Excise Duty - general CENVAT rate on all goods is reduced from 16% to 14%
Provision for TUFS in textiles increased to RS 1,090 crore in 2008-09.
Varanasi and Sibsagar, Bhiwandi, Erode, Naraspur and Mooradabad to be developed as mega clusters.
Coir Board income tax exempted
View Budget Speech 2008 -09
Capital formation priority as provision for TUFS increased to Rs 1,090 in the next fiscal
The Macro Economics
GDP in the fiscal 2007-08 increased by 9.6% driven by growth in services and manufacturing which are estimated to grow at 10.7% and 9.4% respectively. The growth rate of agriculture for 2007-08 is estimated to by at 2.6%. Saving rate and investment rate is estimated to be at 35.6 % and 36.3% respectively, by the end of 2007-08. FDI amounted to US$12.7 billion and FII to US$18 billion. Reduction of taxes has led to increase in Tax-to- GDP ration set to rise from 12.5% at the end of 2007-08 from 9.2% in 2003-04.
The Textile Industry
The Textile industry has seen a tough fiscal go by and this budget was looked upon for relief. Though the finance minister showed concern for the exporters who are dealing with a strong rupee, nothing new was announced.
No duty-cuts expected by the industry may be disappointing. The National Calamity Contingent duty (NCCD) of PFY which was levied only on PFY has been removed.
There was no change in the peak rate of custom duty, and all other rates for yarns and fiber, textile machinery were left unchanged. General CENVAT rate on all goods is reduced from 16% to 14% to give some stimulus to the manufacturing sector in general.
However there were other positives to cheer the industry. Growth in the capital goods has been impressive at 20.2% and to sustain capital formation in the textile industry, provision for TUFS in textiles has been increased to RS 1,090 crore in 2008-09 from Rs 911 crore in 2007-08.
The Scheme for Integrated Textile Parks (SITP) shall be continued in the 11th plan with the provision of Rs 450 crore in 2008-09. Also, it’s been planned to scale up the production and infrastructure in the six centers of - Varanasi and Sibsagar for Handlooms, Bhiwandi and Erode for powerlooms, and Naraspur and Mooradabad for handicrafts, to see them become mega-clusters. An initial provision of Rs 100 crore has been made with an estimate of Rs 70 crore to be needed for each cluster. Allocations to the Hand loom sector have been increased to Rs 340 crore in the next fiscal.
Coir Boards income has also been exempted from income tax. This may help the Coir Board business, involved in the manufacture of the specialty coir fibre, mostly exported and used for making mats and ropes.
Ultra Mega Power Project (UMPP) in Maharashtra and Tamil Nadu would help in alleviation of the power crises faced by the textile manufacturers.
Key Highlights:
No additional scheme for exports hit by strong rupee.
NCCD of 1% remove from PFY.
Excise Duty - general CENVAT rate on all goods is reduced from 16% to 14%
Provision for TUFS in textiles increased to RS 1,090 crore in 2008-09.
Varanasi and Sibsagar, Bhiwandi, Erode, Naraspur and Mooradabad to be developed as mega clusters.
Coir Board income tax exempted
View Budget Speech 2008 -09
Labels: textile - Union Budget of India 2008
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