THE YEAR THAT WAS ANALYSIS 2023-24

GLOBAL UNCERTAINITY: THE NEW NORMAL!

The Ukraine-Russia war, the Israel-Hamas war, the tension in middle east, and the South China sea continued to be the headlines of media however the global corporates seemed to have moved on with it as the new normal. The economies world-over looked for self-interest and aligned for fiscal prudence.

These uncertainties put pressure on the global economy, supply chain and consumer demand, however, the resilience was shown in response. As per IMF report, the world seemed divided among US or China leaning countries and neutral countries in this geopolitical scenario. Though the neutral countries may not have played a crucial role during the cold war, but in the present times they are playing important role by connecting the fractured trade & communication lines between the US or China aligned countries. The trade war between US & China increased the trading routes through Mexico and Vietnam. India too came out as one of the biggest beneficiaries in garnering global attention.

Chart-1:

Source: IMF

With all these challenges, the world economy grew at about 3.0 percent in 2023-24 below from 3.5 percent in 2022-23. The central banks world over played important role in managing inflation from 8.7 percent in 2022 to 6.8 percent in 2023 by raising interest rates during the year, thereby easing socio-economic pressure on the masses. The global consumer demand still didn’t pick much during the year causing export-based economies reel under pressure to accommodate their inventories. The countries like India and China who have huge domestic markets managed to subside these impacts. Indian GDP turned out to be growing at highest rate of over 8 percent FY 2023-24 and the future looks promising in the years to come. The same had been evident from the exponential growth in the foreign inflow of funds in the Indian stock markets. The fund infusion from the retail investors alongside FIIs showed trust in a long-term bull market for India. There seemed to hold up demand/ projects from the industry in India for the want of new policies or incentive schemes owing to upcoming general election in May 2024, the outlook appeared promising, nevertheless.

INDIAN ECONOMY

To be more specific, India's GDP grew by 8.2 percent, and according to the 2023-24 Economic Survey, it is expected to grow between 6.5 and 7 percent in 2024-25. However, this growth will be influenced by various risk factors, including unpredictable weather, financial market volatility in developed nations, and geopolitical challenges.

Retail inflation decreased from 6.7 percent in FY 2022-23 to 5.4 percent in FY 2023-24. Core inflation for goods and services hit its lowest levels in several years, with India outperforming many developed and emerging economies in meeting its inflation targets. In 2023, India's inflation rate remained within the target range of 2 to 6 percent. However, food inflation increased from 6.6 percent in FY23 to 7.5 percent in FY24.

India's fiscal deficit was reduced from 6.4 percent in FY23 to 5.6 percent in FY24, largely due to strong growth in direct and indirect tax revenues, driven by robust economic activity and improved tax compliance. Additionally, higher-than-expected non-tax revenue from RBI dividends boosted revenue receipts. The current account deficit also decreased from 2 percent in FY 2022-23 to 0.7 percent of GDP in FY 2023-24.

Industrial R&D advanced during the year, as evidenced by India's improved ranking on the Global Innovation Index (GII) to 40th position in 2023-24. Notably, the number of patents granted increased to 103,057 in 2023-24, up from 5,978 in 2014-15. Similarly, registered designs rose to 30,672 from 7,147 during the same period.

India's start-up ecosystem is thriving, with over 45 percent originating from Tier 2 and 3 cities. The number of officially recognized start-ups (registered with the Department for Promotion of Industry and Internal Trade) grew from 300 in 2016 to more than 125,000 by March 2024. Over 13,000 of these start-ups operate in fields such as AI, IoT, robotics, and nanotechnology. Between 2016 and March 2024, start-ups filed over 12,000 patent applications. Additionally, 135 Alternative Investment Funds (AIFs) have invested INR 180 billion (US$2.1 billion) in start-ups as of FY24. The Bharat Startup Knowledge Access Registry promotes collaboration within the ecosystem.

While the compliance burden on businesses has eased compared to previous years, it remains heavy, particularly for small and medium enterprises.

Source:
https://www.india-briefing.com/news/economic-survey-of-india-2023-24-report-highlights-33716.html/#:~:text=Inflation%20trends,has%20reached%20multi%2Dyear%20lows

PRODUCTION, EXPORTS, AND IMPORTS (2023-24)

The production of the Textile Engineering Industry (TEI) registered a marginal increase of just 2% viz. Rs.14,639 crores in 2023-24 as against Rs.14,412 crores achieved during 2022-23. Except for spinning, processing and spares & accessories, which recorded +4%, +28% and +2% production over the previous year, all other industry segments reported negative turnover during the fiscal year. While the first 2 quarters showed tremendous growth, the sluggishness started catching up during the Q3 and crippling the Q4 quarter completely due to the global uncertainties caused by wars in Ukraine, and Gaza.

Both greenfield and brown field projects were acquired by the industry. Unlike last year, domestic industry’s capacity utilization was around 84% down from 90% and the industry was able to achieve a surplus of just 2% of their annual turnover as compared to 2022-23. The upward trajectory witnessed during the first two quarters of the fiscal was pulled back in a downward trend during the last quarters of the year which was an alarming sign. Though domestic production and its consumption in the local market was a good signal, the exports were hit during the year.

Table-1:

Chart-2:

The exports of textile machinery were down by 14% during the year as compared to the preceding year. On the basis of the data furnished by the Directorate General of Commercial Intelligence & Statistics (DGCI&S), Kolkata, the export of Indian TEI stood at Rs. 4451 crores in 2023-24 from Rs. 5183 crores in 2022-23. TMMA assessed export performance of the Indian TEI from the private source as well and found that TEI exports for the 2023-24 was Rs. 6165 crores as against Rs. 7036 crores achieved during 2022-23.

Similarly, imports also spiraled down by 16% due to geopolitical issues and stress on the international supply chain. Based on the data procured from the DGCI&S, Kolkata, the import of the Indian TEI stood at Rs. 17311 crores in 2023-24 as compared to Rs. 20718 crores in 2022-23. It was assessed from the private source as well that showed the TEI imports for 2023-24 to be Rs. 19954 crores as against Rs. 23804 crores achieved during 2022-23 period.

DATA ON THE TEXTILE ENGINEERING INDUSTRY (5 YEARS)

TMMA(I) had been maintaining and extrapolating domestic production data based on the reported figures by the industry. The exercise is based on a survey report done by the Textiles Committee with support of TMMA in 2007, and the import and export data analysed in subsequent years.

a) Production and Export-Import Trend

The chart below shows a rising trend of production, import, and export for the last 5 years.

Chart-3:

b) Domestic Demand Trend

The total domestic demand for textile machinery during 2023-24 was Rs. 25303 crores and the bulk of it was met through imports during the year. In the past 5 years the share of domestic demand met by Indian TEI shows an upward trend from 24% in 2019-20 to 40% in 2023-24.

Chart-4:

It was also the second time in the last 5 years that the indigenous manufacturers’ supplies to the domestic market touched 40% of the domestic demand.

Chart-5:

c) Capacity Utilization Trend

The estimated capacity of the domestic TEI was increased to Rs.17,500 crores in 2023-24 from Rs. 15500 in 2022-23. The production was Rs. 14639 crores as against Rs. 14412 crores during the previous year. In the last three fiscal years the capacity utilization had been over 90% on average and in the last 5 years it had been 73% which is a healthy sign for the industry’s growth from indigenous production and consumption locally.

Chart-6:

d) Category-wise Production Trend (Value in Rs. Crore)
CATEGORY 2019-20 2020-21 2021-22 2022-23 2023-24
Spinning & Allied Machines (8444 & 8445) 2545 2522 7377 9182 9590
Synthetic Filament Yarn Machines (8445) 350 278 489 513 404
Weaving & Allied Machines (8446) 715 454 784 1025 554
Processing Machines (8445, 8448 & 8451) 655 884 1082 1329 1697
Misc. (Spinning, Weaving & Processing, Jute) Machines (8448) 30 29 2 36 35
Textile Testing & Measuring Instruments (9024) 165 100 81 68 68
Hosiery Machines/ Hosiery Needles (8447, 8448) 80 53 65 60 60
Total Of Machinery 4540.00 4319 9880 12213 12406
Spares & Accessories (8448) 815 777 1778 2198 2233
Grand Total 5355.00 5096 11658 14412 14639

Table-3:

e) Export Trend

Table-4:

f) Import Trend

Table-5:

Note: These figures are based on the market intelligence of the industry by TMMA(I).

TUF SCHEME

The Amended Technology Upgradation Fund (ATUF) Scheme was concluded on 31st March 2022, with a total of 14389 UIDs generated, having provisional subsidy Rs. 4963.15 crores, and project cost of Rs. 69161.87 crores. During 2023-24, a sum of Rs 900 crores was allocated by the government to meet the committed liabilities of the ATUF scheme and the previous schemes such as RRTUF, RTUF and MTUF in the subsequent months.

During the year, the office of the textile commissioner coordinated and processed the ATUF Scheme efficiently. Since the scheme was concluded, only a limited number of cases related to the enlistment of textile machine manufacturers, induction of new machine types in the ATUF scheme and the release of ATUF subsidy were tabled. To quantify the efforts, a total of 11 Internal Technical Committee (ITC) meetings chaired by the Joint Textile Commissioner, 5 Technical Advisory Committee Meetings (TAMC) meetings chaired by the Textile Commissioner, and 2 Inter Ministerial Standing Committee (IMSC) meetings chaired by the Hon. Minister of Textile; were held in 2023-24.

PROGRESS OF TUFS

As per the 38th Meeting of the Technical Advisory-Cum-Monitoring Committee (TAMC) on Amended Technology Upgradation Funds Scheme (ATUFS) held on 28.06.2024 under the Chairmanship of Mrs. Roop Rashi Mohapatra, Textile Commissioner through Video Conferencing, the review progress of TUFS, Fund allocation and expenditure under TUFS in 2023-24 as on 31.03.2024 was as under: -

Fund allocation & expenditure under TUFS (as on 11.06.2024)
S. No Scheme Allocation (BE/RE) Rs. in Cr. Expenditure Rs. in Cr.
1 ATUFS 675 481.51
2 MTUFS 5.01
3 RTUFS 1.53
4 RR-TUFS (bank routed) 88.09
5 RR-TUFS (MMS) 1.62
Total 577.76

Table-6

Note: Utilization of 85% of allocation of funds towards extension of supports to the textile units was done.

a) ATUF (Position as on 11.06.2024)

Segment wise details are mentioned below.

S. No Segment Name UID Issued Project Cost Rs. in Cr. Provisional Subsidy Rs. in Cr. Subsidy released Rs. in Cr.
1 Garmenting (15%CIS) 1468 3325.55 340.31 107.62
2 Handloom (10% CIS) 60 56.30 04.57 0.38
3 Jute (10% CIS) 13 16.52 01.31 0.38
4 Silk (10% CIS) 30 41.44 02.71 0.38
5 Multi activity (10%CIS/15%CIS) 2293 31693.05 2039.02 576.97
6 Processing (10% CIS) 1622 6602.54 445.28 183.9
7 Technical Textile (15% CIS) 534 4243.68 396.42 141.26
8 Weaving (10% CIS) 8369 23180.87 1733.37 1146.4
TOTAL 14389 69161.87 4963.15 2156.3

Table:7

NEW SCHEME REPLACING TUFS

Though the MoT, cleared the TUF subsidy cases to its best possible capability, keeping all checks and balances and meeting legal parameters after satisfying the textile industry in majority of the cases; one thing it conveyed clearly that the government wasn’t going to launch/ relaunch any TUF kind of subsidy. Also, being the WTO complaint, the country won’t be able to bring out such a scheme. Hence, there was scope for newer mechanism to promote the indigenous manufacturing.

Earlier, the Government had launched ambitious schemes such as Technical Textiles, PM MITRA Parks, Technical Textile Mission, and Production Linked Incentives (PLI) for the textile industry. However, it was felt that the MSMEs and the Textile Machinery Industry should also be brought under similar schemes for the technology development and import substitution to promote “Make in India”.

Therefore, a series of meetings were held among the government, industry, and academia to define the contours of the new scheme that would replace the ATUF scheme.