There is a dire need to fast-track the economy. A beginning has to be made involving at times painful and difficult decisions. Enabling conditions would have to be provided for increasing production, exports and employment opportunities. The primary prerequisite for all these is investment. Investment in industry is urgently required to impart inherent strength to the economy and confer on it the resilience to manage shocks and in the long term cure the economy of inflationary propensities and the like. There is an inverse relationship between industrial investment and interest rates. High interest rates while keeping inflation low have always disabled investment in industry. For achieving an economic turnaround a special line of credit for industry at internationally competitive interest rates is imperative.
Competitive availability of quality raw materials, cotton as well as man-made fibers is very important for the textile industry. Acclaimed technology for production of genetically modified, high yielding and pest-resistant cotton should be adopted to meet the persistent shortage of cotton and the growing gap between consumption and production.
APTMA is funding cotton research by contributing Rs. 250 million as cess on cotton and this contribution is being increased by 250%. There is need for cotton research management to be re-structured to involve farmers and the industry in a meaningful way.
The development of the textile industry is restricted by the low use of Man-Made Fibers in the fiber-mix. Our MMF and cotton use ratio is 20:80 as against the world-wide 60:40 use. Correction of our fiber-mix ratio will bring about qualitative improvement to our product range as well as broaden the range itself. Towards this end it is imperative that
- All duties on import of MMF be done away with altogether.
- Inoperational domestic capacity be revived without delay and
- New investment encouraged so that MMF shortage is overcome.
HIGH INTEREST RATE REGIME
An internationally competitive interest rate regime is a must for present investment to bear fruit and for not deterring new investment inflow. There is an inextricable link, an inverse relationship between investment and interest rates. Investment in the textile industry increased during the period the interest rates were low and decreased with rise in interest rates. Also, with rise in interest rates there came about an increase of non-performing loans. Another negative fallout of higher interest rates was the whittling down of exports. In spite of the fact that the textile industry installed sizable additional capacity to create exportable surplus, textile exports either declined or stagnated, both in quantity terms as well as value-wise. Thus, low interest rates are conducive to investment inflows. The international bank rate prevalent presently is not more than 2%. In the circumstances our interest rates of around 15% are not viable and good enough for any investment to come about. Under the Textile Investment Support Fund (TISF) a special interest rate comparable with the international interest rate would encourage new investments.