The government of India has approved the Production Linked Incentive (PLI) Scheme for Textile Sector on Wednesday 8th September 2021. What is PLI Scheme and how does this will benefit the textile sector? Let’s discuss this in detail.
1) What is PLI Scheme?
- PLI Scheme stands out for Production Linked Incentive Scheme which provides incentives to the companies for domestically manufacturing goods to reduce and import and improving the cost competitiveness of local goods.
- This scheme offer incentive on incremental sales for product manufactured in India. This scheme was announced in March 2020.
- PLI Scheme covers 13 sectors of the economy.
2) Approval of PLI Scheme for Textile Sectors:
- On Wednesday, 8th September 2021 Government of India extended the PLI Scheme to Textile Sector
- Under this PLI Scheme, Incentives worth Rs. 10,683 Cr. will be provided to the industry over 5 years.
- It is expected that this scheme will result in a fresh investment of over Rs. 19,000 Cr. and additional production turnover of over Rs. 3 Lakh Cr. in the coming 5 years.
- PLI Scheme for textiles is a part of the overall announcement of the scheme for 13 sectors made earlier during the Union Budget 2021-22, with an outlay of Rs. 1.97 Lakh Cr.
3) Indian Textile Sector- Overview:
- The Textile & Apparel (T&A) industry at USD140bn contributes ~5% of India’s GDP.
- Exports make up 24% of the Textile Sector and 12% of the overall export earnings of the country.
- The Textile and Apparel (T&A) sector is set to witness 10% CAGR over FY20-26 to USD 255 billion, despite a 26% dip in FY21 to ~USD103bn.
- Key Growth Drivers:
- Heightened Domestic Demand due to rising per capita consumption of apparel.
- Work from Home (WFH) culture, has led to a rise in home improvement products.
- Robust Government policies.
- Global Trends shifting in India’s favor
- India is the largest producer of Cotton, 2nd Largest producer of Man-Made Fibre, and the Largest Producer of Silk.
4) Benefits to PLI Sector:
- PLI Scheme will promote the production of high-value MMF (Man-Made Fibre) Fabrics & Apparel, Garments, and Technical Textiles in the country.- By encouraging fresh investments.
- It will help to create employment for over 7.5 Lakh people directly and several lakh jobs for supporting activities.
- The scheme will also pave the way for the participation of women in large numbers
- This scheme will help India to regain its dominance in the Global Textiles Trade and emerge as Global Champions.
- Higher priority for investment in Aspirational Districts & Tier 3/4 towns.
- PLI Scheme for Textile sector will positively impact states like Gujarat, Uttar Pradesh, Maharashtra, Tamil Nadu, Punjab, Andhra Pradesh, Telangana, and Odisha
- Technical Textile:
- It is a new age textile, whose application in several sectors of the economy, including infrastructure, water, health and hygiene, defense, security, automobiles, aviation, etc.
- It will improve the efficiencies in those sectors of the economy.
- GOI has launched a National Technical Textiles Mission in the past for promoting R&D efforts in that sector.
- PLI will help further, in attracting investment in this segment.
5) 5 Stocks to Watch:
With the approval of the PLI Scheme to the textile sector, the following stocks could be benefitted”
i) Arvind Limited
ii) KPR Mills Limited
iii) Welspun India Limited
iv) Bombay Dyeing and Manufacturing Company
v) Raymond Limited
All the suggested stocks in the article are not direct investment advice and one should research thoroughly before making any investment decision or should consult a financial advisor.