Gujrat Opportunities May2019

Investing in Garment Manufacturing in Gujarat: A Golden Opportunity

Gujarat, often known as The Textile State of India, is one of the most competitive Indian states for textile and garment manufacturing to establish, operate and expand. The state has its presence in the entire textile manufacturing value chain, starting from cotton fiber production to apparel and made-ups production. Gujarat contributes ~25% to the country’s textile and garment manufacturing output and ~12% to country’s textile and apparel exports .

Some of the major advantages that make Gujarat ‘The Textile State of India’ are as follows:

• It is the largest cotton producing state in India and accounted for ~36% share in India’s total cotton production in 2017-18.

• It is the largest manufacturer of man-made fiber (31%) and man-made filament fabric (38%).

• The state produces 30% of the country’s woven fabric, is home to more than 50% of the country’s processing machinery manufacturers and 90% of weaving machinery manufacturers1.

• It is a leading manufacturer of technical textile fabrics, contributing to 25% of the country’s technical textile fabric output1.

• Gujarat is also the largest producer of denim in India (65%) and the third largest in the world1.

• The state is a hub for many leading textile institutes which include Ahmedabad Textile Industrial Research Association (ATIRA), National Institute of Design (NID) in Ahmedabad and National Institute of Fashion Technology (NIFT) in Gandhinagar.

The state also has 18 textile related project clusters. The major textiles and garment manufacturing hubs in Gujarat are listed below:

Several leading national and international textile and clothing manufacturing have invested in the state owing to its availability of strong raw material base coupled with investor friendly policies. Some of the key textile and garment industry players that have presence in Gujarat include Arvind Mills, Welspun, Vardhman Group, Alok Industries, Raymond, Garden Silk Mills, Mafatlal and Aditya Birla Nuvo.

Gujarat is also well connected to the major cities of the world both by air and sea routes. With a coastline of ~1600 km and more than 40 ports, the state acts as a gateway to many landlocked states of the country. Further, the dedicated freight corridor joining the metros of India and the DMIC (Delhi Mumbai Industrial Corridor) influences more than 60% of the total area of Gujarat.

Apart from the well-developed infrastructure and manufacturing capacities, the state also ensures availability of skilled staff and workers at an economical cost. Taking into account, the wage subsidy offered by various state governments for garment manufacturing, the effective minimum wages in Gujarat is one of the least as compared to other garment manufacturing states.

Considering the high potential in the sector, the state government of Gujarat announced Gujarat’s Garment and Apparel Policy (GGAP) in October, 2017.

Gujarat Garment & Apparel Policy 2017 (GGAP)

The policy aims at creating 100,000 new jobs, generating additional exports and attract investment in garment industry over the next five years. Any enterprise with at least 150 new machines (Cutting & Industrial Sewing Machines) with a minimum of 300 employees can apply for availing benefits under the scheme. The highlights of the policy for garment industry are as follows:

Out of the various incentives provided, the major attractions for the garment manufacturing units are payroll assistance and infrastructure support in form of plug & play set ups. Under payroll assistance, wage subsidy of Rs. 4,000 per month (Rs. 3,200 for male) provided will have direct, positive impact on the cost competitiveness of the apparel manufacturers in the state as it would mean approx. 30-35% wage subsidy. In terms of cumulative fiscal benefits, the interest subsidy, power subsidy and payroll assistance would provide for almost the entire project investment in 5 years.

Benefits Available to a Garment Factory with 500 Machines under GGAP 2017

As per the benefits under the Gujarat Garment & Apparel Policy, the below figures illustrate the incentives an investor will gain by establishing a garment manufacturing unit with 500 sewing machines:

Note: The above subsidy calculation for garment factory has been done considering a standard garment business plan with industrial sewing machines such as Juki sewing machine, Brother sewing machine, etc.

As evident from the table, the policy provides incentives of up to 125-130% (over a period of 5 years) of the total capital investment over and above the Govt. of India schemes of ATUFS & SPELSGU. Unlike many other states, the policy incentives are not targeted to compensate for any disadvantages but rather they aim at further leveraging the state’s advantages allowing investors to invest bigger and better. This makes it one of the most attractive Garment & Apparel Policy across all Indian states.

As an overall package, Gujarat is one of the most lucrative states for garment manufacturing. Further, the recently launched Textiles Policy of the state is creating a value proposition for the investors to set-up an integrated garment manufacturing unit. Considering that the state is well recognized for swift business approvals and superior ease of doing business, we at Wazir Advisors strongly believe that the state will witness a spur in investments in the coming years.

Wastra, an initiative by Wazir Advisors helps clients to establish engineered garment factory. We believe in establishing a set-up with trained manpower, optimum technology, ideal infrastructure and rationally designed processes. Wastra is a team of garment factory consultants who have the complete know of how to start a garment factory, including preparing garment business plan, technology analysis, manpower budgeting, implementing systems and processes and anything that is required in a garment factory setup.

The article has been authored by Ayushi Puri, Consultant and Abhay Pratap, Associate Consultant.