Chandrajit Banerjee | Budget focus on tourism, retail & textiles crucial to generate jobs

Four key labour-intensive sectors, including tourism, textiles and ready-made garments, leather and footwear, and retail, possess the potential to create large-scale employment. Let us examine what would make a workable policy strategy for these sectors.

Tourism: India’s diverse tourist attractions, from natural landscapes to rich cultural heritage, have few parallels anywhere in the world, making tourism a significant growth area. The draft Tourism Policy 2022 should be approved and implemented. It aims to achieve a tourism GDP of $3 trillion by 2047. The government has announced the development of 50 new tourist destinations. Given India’s vast tourism potential, this could be scaled up to develop 200 new destinations in a time-bound manner. Granting infrastructure status to hotels independent of geographical or population criteria, granting deemed export status to foreign exchange earnings from foreign tourists, and exempting GST from such earnings would enhance the sector’s competitiveness.

A national and international multi-channel marketing campaign, Incredible India 3.0, must be launched to showcase India’s diverse tourist attractions. Brand ambassadors in select countries and setting up special desks in Indian embassies abroad would further promote India Tourism.

Tourist safety is crucial for tourism promotion. A “Mission Suraksha”, with dedicated tourist police and round-the-clock security at major destinations, should be launched to ensure tourists’ safety and trust.

Retail: With rising per capita income levels, the retail sector in India is poised for rapid growth. A comprehensive National Retail Policy, covering all aspects of retail, including laws, regulations, clearances, funding, and other relevant aspects, should be announced, which would address issues related to ease of doing business, modernisation, digitisation, access to credit, insurance, infrastructure, and sustainability.

Banks should be incentivized to launch lending products catering to retailers’ specific needs, while urban planning needs to create dedicated “retail zones” with subsidised rentals for smaller retailers. A government-backed shopping festival, similar to the Dubai Shopping Festival, would boost both tourism and retail sectors in India.

Textiles: India has the potential to be a leader in the global textile and apparel value chain, given its abundant raw materials, vast labour pool, mature industry, and robust domestic market. This potential leadership could see India capturing over 15 per cent of global trade in textiles, creating an estimated 40-50 million additional jobs.

Countries like Vietnam and Bangladesh enjoy a cost advantage due to their FTAs with developed markets. Facilitating market access to large consuming economies such as the UK, the European Union through Free Trade Agreements (FTAs) will level the playing field for India’s textile sector.

The existing Production Linked Incentive (PLI) 2.0 scheme for the textile sector requires a high threshold investment of Rs 100 crores in fixed capital. Lowering the investment threshold would align better with the sector’s realities, enabling more investments. Further, addressing the inverted duty structure in the man-made fibres (MMF) sector, and implementing the Mega Integrated Textile Region and Apparel (MITRA) scheme would prove to be effective.

Leather and footwear: Leather and footwear has a long and established base in the country, which could be leveraged for positioning India as a reputed global player in the sector. To promote “Brand India” for the leather and footwear sector, the participation of Indian players in global trade and business fairs should be facilitated. The existing scheme for “brand promotion” should be modified to cover brand promotion both in India and abroad.

Improving quality could be the differentiating factor for the sector. Creating an “Indian Leather Mark” based on quality assurance evaluations would help establish a standard of excellence. Developing a “Quality Manual and Accreditation Scheme” and launching an audit programme to benchmark domestic companies with international best practices would further enhance the sector’s reputation.

Developing four to five footwear clusters with common infrastructure, including design studios, trade centres, testing centres, skill development centres and entrepreneur development centres, would support the sector’s growth.

Fifth, I would like to share a thought on the Production Linked Incentive (PLI) scheme which has been successful in providing a concerted push to targeted sectors. With investment of over Rs 1.46 lakh crores, production value of Rs 12.5 lakh crores, exports of over Rs 4 lakh crores, and employment of over 9.5 lakh individuals, the PLI scheme is on the way to transform the Indian manufacturing sector. Building on this, the government should consider including additional employment generation as additional criteria to determine the level of benefits, along with incremental sales.

Finally, employment generation is inherently linked to industrial development and new investments. Therefore, the targeted sectoral interventions mentioned above need to be complemented with measures to improve the overall Ease and Cost of Doing Business, for which reforms in areas such as land, labour, power, and human capital are crucial. Most of these reforms fall under either the State or Concurrent List of the Constitution, necessitating consensus-building between the Centre and the states.

The Goods and Services Tax is a successful model of the Centre and state governments coming together to facilitate significant reforms. The government could consider creating a “GST-like Council” or an “Empowered Group of Secretaries” to build consensus and advance reforms in these critical areas. Such reforms will unlock significant growth potential in the Indian economy and create a conducive environment for large-scale employment generation.

India’s demographic shift presents a unique opportunity to harness the potential of its growing working-age population. By focusing on four key sectors such as tourism, retail, textiles, and leather and footwear, undertaking Next-Gen reforms and linking employment generation to the PLI scheme, India can create large-scale employment opportunities and drive economic growth.