LABOUR REFORMS IN TEXTILE
INDUSTRY
By Ankit Raturi
(00516503516)
B.B.A. LL.B (7th SEM)
SUBMITTED TO –
DR. KAVITA SOLANKI
LABOUR REFORMS IN TEXTILE INDUSTRY
By Ankit Raturi (00516503516)
B.B.A. LL.B (7th SEM)
ABSTRACT
Textile Industry is the second largest employment generator in India providing employment
to over 45 million people directly and accounts to 4 percent of India’s total GDP. Being
such an important aspect of our economy, this industry has failed to live up to its potential
due to its stringent labour regulations. At present there are around 200 labour laws and
around one-fourth are central laws making it complex and difficult to abide. This has led to a
shift in the textile industry structure over the last 3 decades towards unorganized sector
where impact of labour law is limited. Over the last decades, out of 10 million jobs created in
the manufacturing industries over 65% of the jobs were created in the informal sector due to
complex labour regulations. This expanding informalisation of the industry has been the
biggest hurdle in the progress of the industry as well as the labour law regulation. However,
this decade has the revival of textile industry where government has introduced new
schemes for the employers and employees like fix term employment, provident fund, tax
benefits etc. by injecting huge capital package around Rupees 6000 crores. The law is as
good as its implementation. Thus the roadmap has been set but implementation of these
schemes and the impact it makes on the workers of this industry is yet to seen.
Keywords- Textile Industries, Labour Regulations, Unorganised Sector, Textile, PMRPY,
employment.
Synopsis
1.
2.
3.
4.
5.
6.
Introduction
Legal Framework
Challenges
Government Initiatives
Conclusion
References
Introduction
Textile Industry is the second largest employment generator in India providing employment
to over 45 million people directly and accounts to 4 percent of India’s total GDP. It
accounts for 10% industrial production, 27% of the country’s foreign exchange inflows and
11% of the country's export earnings.1
1
Raveen Mann, Invest India: National Investment Promotion and Facilitation Agency, available at:
https://www.investindia.gov.in/sector/textiles-garments
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The domestic industry was at $ 140 Billion in FY 2018 and is expected to reach $ 223
Billion by 2021. Increase in per capita especially in disposable income, favoring demographic
change, increasing demand for quality is among the biggest factors at play for the growth of
industry. The industry can be classified on the basis of organization into two categories- (a)
Organized Sector (b) Unorganized Sector. Unorganized sector accounts large part of
industry with products like handlooms and handicrafts, whereas mills and factories are the
cornerstone of organized sector. The decentralized power-looms and knitting sector spread
largely across Western India are the key drivers of the industry. The industry is also a huge
consumer of agriculture Industry. Hence, it indirectly benefits agriculture industry. It is
dependent on Agriculture industry for supply of raw materials like cotton and jute. As a
result, the production of cotton has risen to 36.1 Million bales in 2019 making India the
second largest producer of cotton.
As much as the industry is growing, the same cannot be said for laborers working in the
industry. There has been a massive shift in the textile industry structure over the last 3
decades towards unorganized sector where impact of labour law is limited. Over the last
decades, out of 10 million jobs created in the manufacturing industries over 65% of the jobs
were created in the informal sector due to complex labour regulations. This expanding
informalisation of the industry has been the biggest hurdle in the progress of the industry as
well as the labour law regulation.
Legal Framework
Labour as an entry is covered under concurrent list of Schedule 7 of the Constitution of
India, thereby providing competence to both state and central legislature to legislate. The
country has at present around 200 labour laws out of which around 44 are central acts and
rest are state acts. Central acts can be further classified into three categories- (a) acts which
are enacted and enforced by the Central government, which are 12 in number (b) acts which
are enacted by the central and enforced by both state and central government and (c) acts
which are enacted and enforced by various state government which apply to respective
states, which are 16 in number.2 Out of these, the most prominent ones are Trade Union
Act (1926), Industrial Dispute Act (1947), The Code on Wages (2019) 3 and Industrial
Employment Standing Orders Act (1948).
Enactments of so many laws with overlapping areas have made labour regulation very
complex and stringent. In the words of Arvind Panghariya and Jagdish Bhagwati in
their book ‘India’s ‘Tryst with destiny’, labour laws in India are so stringent that u can’t obey
100% of them without breaking 20% of them. Bhagwati J, while deciding on a case observed
that what bark is to a tree, law is to a society. If the tree grows, bark has to grow with it, or
2
Sodhi, J.S. “Labour Law Reform in India.” Indian Journal of Industrial Relations, vol. 50, no. 1, 2014, pp. 100–
117., www.jstor.org/stable/24547025.
3
The Code on Wages , 2019 (Act 29 of 2019) received presidential assent on 8th August, 2019 and as has replaced
four acts namely, (i) the Payment of Wages Act, 1936, (ii) the Minimum Wages Act, 1948, (iii) the Payment of
Bonus Act, 1965, and (iv) the Equal Remuneration Act, 1976.
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else it will hamper the growth of the tree. Similarly, since most of the labour laws were made
around independence and have not been duly updated, they have failed to meet the demand
of the labour society.
The impact of the restrictive and complex labour regulation has forced the investors to set
up plants in Vietnam, Bangladesh and Thailand.
Challenges
One of the biggest hurdles in the growth of the Indian textile industry is low export. The
textile industry stood at $140 Billion, out of which $100 Billion was consumed domestically
and $40 Billion was exported. Further dividing the export, $22 Billion was Textile import
while $18 Billion was apparel export. Although apparel export has seen a spike of $1 Billion
compared to $17 Billion export in 2015, but the growth still has been minimal.
On the biggest reasons for slow growth has been the fierce competition in cheaper garment
market, faced from countries like China, Sri Lanka, Bangladesh and Vietnam. Moreover,
tariff barriers and unfavorable quotas by MFA (Multi Fiber Agreement) to countries like
Bangladesh also have added to the cause. MFA governed most of the global textile and
apparel supply by providing quotas to developing countries in order to protect local farmers
and industry from material market shift. However, MFA has not imposed substantive
restrictions on emerging economies like Bangladesh which has made competition stiffer. In
addition to these, the difference in cost of capital has also been of paramount importance. In
India, lending rates have been around 11-12% while in countries like China, Bangladesh and
Turkey it has been around 7-8%. Substantially high lending rates coupled with high power
cost has drastically increased India’s cost of production which results in low export rates.
Some of the other challenges faced by the textile industry are lack of government backing.
Countries like Bangladesh, Pakistan and Turkey enjoys duty free access to textile markets of
US and Europe whilst India misses out on this big advantages. Moreover, tax slabs for
natural and manmade fiber under newly introduced GST is 5% and 18% respectively which
has deeply affected textile industry especially SME. Although benefits of GST are to be
reaped in the long term, but currently has brought small scale enterprise’s growth to a halt.
Moreover, tax slabs of India do not conforms to the global fiber neutral policy whilst the
competing countries have followed those neutral standards on manmade and natural fabric.
Lastly, infrastructure also plays a major hurdle in the growth of Indian Textile industry. Since
most of the industry is unorganized one, they lack modern technologies to compete at global
level. Resultant, India has a lower efficiency rates compared to other countries which stands
at 40-45%. Bangladesh has an efficiency of 50-55% while China has 60-65%. This problem
coupled with lack of skilled labour poses one of the biggest threats to the industry.
Government Initiatives
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To revive the textile industry, Government of India, has come up with new policies to
encourage export and laborer welfare including a 6000 crores package for. Moreover, it has
allowed 100% FDI in textile industry via automatic route.
(a) Policy initiatives
●
Government has allotted 690 crores ($ 168 Million) in order to set up 21 modern
manufacturing plants spread across 7 states.
●
The Directorate General of Foreign Trade (DGFT) has revised rates for incentives
under the Merchandise Exports from India Scheme (MEIS) for two subsectors of
Textiles Industry - Readymade garments and Made ups - from 2 per cent to 4 per
cent.
●
In order to support the local industry, the Government of India has doubled the
custom duty on over 500 products in August 2018.
●
Government has also decided to boost the industry and create new jobs by
introducing special packages of the amount $ 31 billion. By August 2018, government
has brought in $ 874 Million.
●
The Government of India has taken several measures including Amended
Technology Up-gradation Fund Scheme (A-TUFS), scheme is estimated to create
employment for 35 lakh people and enable investments worth Rs 95,000 crores (US$
14.17 billion) by 2022.
●
Integrated Wool Development Programme (IWDP) approved by the Government of
India to provide support to the wool sector starting from wool rearer to end
consumer which aims to enhance the quality and increase the production during
2017-18 and 2019-20.
●
The Cabinet Committee on Economic Affairs (CCEA), Government of India has
approved a new skill development scheme named 'Scheme for Capacity Building in
Textile Sector (SCBTS)' with an outlay of Rs 1,300 crores (US$ 202.9 million) from
2017-18 to 2019-20.
(b) Pradhan Mantri Rozgar Protsahan Yojana (PMRPY)
Pradhan Mantri Rozgar Protsahan Yojana was introduced in the year 2016 and is
implemented by the Ministry of Labour and Employment. The Scheme aims to provide
encouragement to Employers for enhancing employment by reimbursing for Employees’
Provident Fund (EPF) and Employer’s Pension Scheme (EPS). Under the Scheme, central
government pays employer’s contribution of 12% for EPF and EPS. By 2019, the scheme
had benefited more than one crores people. The benefit received under the scheme are two
folds – (a) it helps employers in increasing employee base by paying 12% of EPF and EPS
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and (b) it directly benefits employees by providing jobs as well as access to provident fund,
pension and insurance. Moreover, EPF has been made optional for employees earning less
than Rs 15000 per month.
(c) Fixed Term Employment
Textile industry is a seasonal sector. Keeping this in mind, government has introduced fixed
term employment in textile sector. Fixed term employment allows employers to hire
employees on a contractual basis depending on the supply. Moreover, overtime overs has
been raised to 8 hours which is twice than that provided under the Factories Act, 1948. This
allows the workers to earn more when the demand increases for the supply commitments by
working extra hours.
(d) Tax deduction
With the enactment of the Finance Act, 2018, amendment has been made to section 80JJAA
of Income tax, whereby, no. of days required to avail tax deduction for garment industry has
been reduced from 240 days to 150 days. Under Section 88JJAA of Income Tax Act, 1961
an Indian manufacturing unit can avail tax deduction up to 30% of the additional salary paid
to the new workmen.
(e) Special initiative for women
In the textile industry, majority of the workforce are women. Government has announced
Integrated Skill Development Skill in order to upgrade the skill set of workforce in which
70% are females. Government has also taken initiative to provide employment to women by
providing 50 lakh charkhas. Consequently, to sell the goods 60 Khadi outlets has also been
opened or revamped.
Conclusion
All these initiatives have helped in the revival of the textile industry. The domestic textile is
expected to grow twice reaching up to $160 Billion in 2025. In 2019, employment increased
from 8.03 Million in FY 2015 to 8.62 in FY 2018. Investment in Textile has also increased of
27,000 crores in one year from FY 2017 to FY 2018. The said initiatives have slowly started
producing results. However, competition from other neighboring countries like Bangladesh,
China and Vietnam remains steep. With the aid of key driving factors like Increase in per
capita especially in disposable income, favoring demographic change, increasing demand for
quality the future of labour reforms looks promising. Although hurdles exists, but cure for
these present problems is to tackle them one by one with careful and articulate planning.
With the global economy soon to pick up pace, opportunities for the Indian Textile Industry
to relive its glory dates will arise. In order to grab those opportunities govt. interests and
industry participants like producer laborers and manufacturers needs to be aligned. A
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Sustainable development without compromising anyone’s interest especially the weaker
sections like farmers and laborers will be the key to that.
References
● https://www.financialexpress.com/economy/labour-laws-ministry-wants-garmentssector-reforms-to-span-textiles-too/305524/
● https://pib.gov.in/newsite/PrintRelease.aspx?relid=148330
● https://www.ibef.org/industry/textiles.aspx
● https://blog.ipleaders.in/labour-law-amendments-development-textile-industry/
● https://pib.gov.in/newsite/PrintRelease.aspx?relid=187563
● https://www.fibre2fashion.com/industry-article/7782/labour-regulations-regulatorycholesterol-for-india-s-textile-industry
● https://incometaxindia.gov.in/Acts/Finance%20Acts/2016/102120000000058877.h
tm
● http://egazette.nic.in/writereaddata/2018/184302.pdf
● https://medium.com/@stitchdiary/11-key-issues-that-are-holding-back-apparelmanufacturing-in-india-115ac16f6722.
● https://crimsonpublishers.com/tteft/pdf/TTEFT.000538.pdf
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