Dec 15, 2008
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Fiscal stimulus disappoints textile sector

Dec 15, 2008

MUMBAI (Reuters) - The fiscal stimulus package announced by the federal government may not be enough to boost Indian textile exports amid a global slump in demand, company officials said on Monday.

The stimulus package extended a two percent interest rate subsidy on bank loans of exporters in textile, leather and jewellery sectors.

The government will also provide 14 billion rupees for a technology upgrade funding scheme for textile firms.

"There is nothing tangible in the package, the government should have done something more for the industry," said Sunil Khandelwal, chief financial officer, Alok Industries Ltd.

"There is nothing new in the entire package that will help the textile sector," said Jayesh Shah, chief financial officer of apparel firm Arvind Ltd.

The textile industry is also not upbeat about the increased allocation for the technological upgradation fund.

"The increased technology upgradation fund allocation is merely to clear the backlog so there's nothing new in that as well," Khandelwal added.

"A lot of claims that are right now with the government will get paid so to that extent that will help release some amount of funds due to the companies," said K P Pradeep, chief financial officer, Himatsingka Seide Ltd.

A recession in major economies of the world coupled with tight credit conditions also is a cause of worry for the sector.

Himatsingka's Pradeep said it was too early to comment on the benefits to the textile community as the export-dependent textile industry was fighting a slump in demand from consumers in the U.S. and Europe.

"Everything is typically dependant on how the market reacts externally, at the end of the day the government can do only as much as it can," Pradeep said, referring to the fiscal tightness both in the U.S and Europe.

"All the benefits government has (now) given were (earlier) withheld or withdrawn," said R K Dalmia, senior president, Century Textiles & Industry Ltd.

"Many things are not covered in the package like restoration of remaining two percent provision for export credit, which we are asking the government to consider," Dalmia said.

"This is a survival measure government has taken. It is a welcome step, but government has to do a lot more," Dalmia added.

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