The Great Indian Budget is a much awaited event of the Indian Economic calendar. On a positive note, the current year’s budget is showing up for the retail segment, entrepreneurs, MSME (Micro, small, medium establishments) and job seekers, too.
The fashion industry occupies a sizeable portion of the MSME segment. The budget promises jobs to over 10 million people, in the current financial year, in the textile industry alone. The textile industry contributes to a whopping (little over) 10% of the GDP (this is inclusive of everything from raw material to the manufactured product that finally reaches the market.) India is one of the largest consumers and creators of fashion labels.
The 2018-2019 budget has fostered new insights. Industrialist and businessmen are now positively changing their attitude towards the implementation of GST. The fiscal year 2016-2017 didn’t show the returns they were hoping for, which is precisely why people have pinned their hopes on the latest budget 2018-2019 budget awaiting economic growth.
The 2016-2017 fiscal year hasn’t proved to be profitable owing to the effects of demonetization. Demonetization put a haul on easy, free spending that was by the means of disposable income. Seizure of accounts, and coming under a close scrutiny of the Income Tax Department, disallowing people from splurging on branded and designer apparel. By the time India started to remonetize and set the wheels in motion, the much-hated Goods and Service Tax was imposed.
Manufacturer, retailer and consumer didn’t welcome GST. Retailers witnessed a sharp drop in sales, especially during peak festive season. This hugely affected the retail segment of apparel and footwear. As a few months went by on the imposition of GST, the government had made some efforts to amend the taxes levied, relaxing the consumer. Presently the GST levied on clothing is 5% (for apparel costing less that INR 1000/-; and 12% for apparel costing more that INR 1000/-. The rates have been reduced to 5% from the sumptuous 18% that was imposed earlier.). However, many retailers are unhappy as they haven’t received their return, in spite of following procedures rigorously.
Also, what is even more interesting is that e-commerce showcases record growth, in 2017. The retail and e-commerce are almost on par. The e-commerce space is expected to notch at a whopping US$ 700 billion by 2020 alone. The current stand records an impressive growth rate of 23% at the rate of USD $17.8 billion. Demonetization certainly stimulated growth in the e-commerce space.
Image Credit: YourStory
We do note that consumers, especially the youth, are more driven to purchase online. This segment is the driving force behind economic growth in the country. In fact, they contribute to the largest segment of the fast growing upward middle class, which is armed with purchasing power.
The use of the internet has only plumed during the recent years, owing to the growing use of the same for a number of reasons. The internet has given small-time designers and manufacturers an opportunity to market their wares online. This has opened avenues, as they are now able to reach out to unconceivable segments with ease. According to Leena Mukhi, a Mumbai based designer states, “I feel that the Internet and the social media is indeed a boon for the apparel and fashion industry. If one enlists measurements, and other criteria perfectly, one can garner record sales online itself, saving on establishment costs.”
It is only now that people have begun to realize that GST is the only tax that consumers are now paying, and all the other taxes have been done away with. This has made consumers realize that there is just enough disposable income left to splurge.
On the flip side, stalwarts from the textile industry have another story to talk about. Initially, the textile industry suffered on the imposition of GST on cotton. Textile manufacturers state that with the taxes imposed on cotton, it is easier to send the raw material out and get the finished product imported into the country. This also helps discount on labour cost. A famed textile stalwart that wishes to remain unnamed, states that, in spite of the grants, we feel that the cotton industry is now entering its dark days.
Also, there were several promises made towards the upliftment of the weavers of the handloom industry, none of which remain fulfilled. In spite of the government making the laws more stringent, the system isn’t bereft of any loophole to escape.
According to Leena Mukhi, we learn that fashions recycle very fast, and owing to the large social ambit that we are raised in there is an incessant demand for apparel. The increased demand for clothing extends not only in the women’s clothing segment, but also in men’s wear and children’s wear segment.
Globalization is another important aspect that influences fashion. Today, famed fashionists borrow trends and cultural elements form other countries, making it a part of their own. The dire need to follow trends also ensures fruitful exchanges. Moreover, India is a dynamic country that is culturally inclined. There is a growing need for clothes for every occasion ranging from from birth to death and everything in between.
As we key off we’d like to add that fashion is an ever-booming industry, all we need to do is to take Indian labels out to the world.
Author: Heer Kothari