The Associated Chamber of Commerce ad Industry (Assocham) has urged the government to reduce excise duty on textile machinery to 8.0 per cent from 14 per cent in order to boost the sector.
Indigenous textile machinery attracts 24 per cent to 29 per cent taxes, which adds to cost of the equipment for the industry, the industry body said.
''If the excise duty is reduced there would be more demand for indigenous textile machinery and the production would increase substantially," it added.
Small and medium enterprises account for a majority of the Rs3,000-crore textile machinery manufacturing units in the country, Assocham said
"As such, the amount of excise duty contribution by the textile engineering industry to the government exchequer would not be more than Rs200 crore," it said.
The chamber also sought a lower customs duty on capital goods of 7.5 per cent and even less for raw materials, parts, components and accessories.
An Assocham-Eco Plus study has identified steel, automobile and textile sectors as witnessing the maximum downfall in demand as global recession starts hitting the Indian economy hard.
The study, ''Demand Scenario in Indian Industry'' has revealed that the sectors where the worst hit in demand was seen were steel (-18 per cent), auto sector (-3.8 per cent), auto components (-0.8 per cent) and textile (-0.25 per cent).
Demand growth across the sectors is hit as the recession engulfs the world economy weakening the demand in India as well, the study said. Average demand growth during the third quarter of the fiscal across all sectors was 10 per cent while it ranged – 18 per cent to 50 per cent, it added.
Sectors which continued to show record impressive growth in demand included chemicals (50 per cent growth), machinery (18.8 per cent), food processing (17.7 per cent).
''The whole economy is adversely affected from the global crisis, however, the impact is more severe in sectors like steel, auto and textiles where demand growth is in negative zone'', said Assocham president Sajjan Jindal. He further said that the thrust of the fiscal and monetary stimulus of the government packages should be on these sectors.
The study analyses eleven sectors based on the corporate results of total 222 companies. It excludes the service sector firms for the unavailability of price/inflation data. The wholesale price index (WPI) was used to adjust the sales for the price rise or decline impact.
The steel sector which derives most of its demand from auto and construction sector is hit hard. The gross real demand was 18 per cent lower in the last three months of the calendar year 2008 as compared to similar period of the corresponding year, said Jindal.
Gross sales in the sector in third quarter of fiscal 2008-09 was Rs17,580 crore, lower than the previous year sales of Rs17,980 crore. Adjusted for the rise in the prices of steel during the three months, the fall in demand was much higher.
Auto sector is one of the worst hit sectors as the economic crisis deepens. Even as the Reserve Bank has slashed the policy rates multiple times, the positive impact of the same is scarcely witnessed on the sector.
Average real demand across the segments in auto sector has shrunk by 3.8 per cent in last three months. The gross sales of seven auto majors slide from Rs8260 crore in October-December 2007 to Rs7,200 crore in similar period of the year 2008. Thus the demand contraction has been even larger in nominal terms at 13 per cent. With the adjustment for price increases, the rate of decline in demand came down to 3 per cent, it said.
The demand of auto component sector is directly linked to the auto sector, which is struggling at domestic as well as international level. The impact on the auto ancillary sector has been less severe as the auto sector. Its demand reduced by 0.8 per cent in the third quarter of the fiscal 09.
The textile sector was hit due to slowdown in exports even as the domestic demand has been intact. The inflation-adjusted demand for the quarter reduced by 0.25 per cent as the textile exports are showing declining trend. The analysis was based on the sales reported by 38 textile firms during October to December 2008 period.
Even as there are concerns on slowdown in capacity expansion, the demand for machinery grew by 18.8 per cent. The analysis was done on the basis of sales data of 16 companies in machinery segment. The total sales had grown from Rs1,200 crore to Rs1,500 crore.
The chemicals sector bucked the trend with the highest growth in demand to the tune of 50 per cent. Gross sales grew to Rs8,260 crore in October to December 2008 from Rs5,000 crore in third quarter 2007. The data was based on 49 chemical companies dealing in chemicals such as agrochemicals, calcium fluoride, lithium fluoride, magnesium fluoride, ammonium hydrogen, powder coatings and synthetic resins.
Demand growth in the electronic goods sector directly depending on the consumer confidence levels, was 16 per cent during the third quarter. However, the price rise in the segment was minimal. The sales of eleven companies analysed increased from Rs2,500 crore to Rs2,900 crore.
The food processing sector has witness 17.4 per cent growth in demand as the domestic demand remained intact for the processed foods. The combined sales of the 18 firms analysed by the AEP recorded 24 per cent jump from Rs1,940 crore to Rs2,410 crore.
Demand growth in the pharmaceutical sector is still showing resilience even as the exports have started declining. The gross sales of 29 pharma companies increased from Rs5,400 crore to Rs6,400 crore during the period analysed. Accounting for the price rise, the demand for pharma sector was assessed as 16.2 per cent.
The demand for cement sector grew by 11.6 per cent for the third quarter in the financial year 2008-09. The analysis based on six cement firms with gross sales for three month period rising from Rs2,000 crore in 2007 to Rs2,290 crore in 2008. As the cement prices moved upwards during the period, the inflation-adjusted sales representing the demand growth came out to be 11 per cent.