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Union handloom budget fails to compensate for corona impact, economic depression

By Narasimha Reddy Donthi* 

Corona had severe impact on handloom sector and weaver livelihoods. Most of them have slipped into poverty. Unfortunately, there is no change in the budget for handloom sector, from the previous interim budget. It is a mere Rs.495.32 crores. Ms. Nirmala Sitharaman, a woman Union Finance Minister, who wears handloom sarees and has a good understanding of handloom products, failed to increase handloom budget allocations on par with the expectations.
In a year, where economic recession was accepted, employment has spiraled down, purchasing power has taken a dent and rural consumption has nosedived, there were expectations that this budget would infuse funds into rural economy. Raising handloom budget was one route for this infusion, stabilizing economy, employment and environment. Economic thinkers probably forgot about the importance of handloom sector in terms of employment potential (especially in rural areas), its positive impact on environment (thus responding to responsible consumption and sustainable production) and a bulwark in stabilising Indian economy (non-handloom textiles are always volatile and monopolised).
Previously, handloom sector got a big blow through a huge reduction from Rs.604 crores in 2017-18 to a mere Rs.386.09 crores in 2018-19. By then, it was already reeling under the twin effects of demonetization and levy of GST. Never before, in the last 100 years, handloom sector has seen such a low.
Demonetisation has severely affected handloom weavers, as handloom production is part of a huge informal economy. Cash crisis has hit them badly, and the tight norms of cash withdrawals has robbed them of any non-government, private money lender support as well. With losses and mounting debts, handloom weavers hoped that the government would announce relief and enable some direct cash transfers.
Government seems to have run out of ideas. It is not even doing any consultations. A welcome move has been the celebration of National Handloom Day, on August 7th. This celebration, initiated and actively participated by Prime Minister, Narender Modi, has raised lot of hopes and expectations among handloom consumers, producers and economists.
Handloom sector budget allocations has become a farcical routine exercise. With the removal of All India Handloom Board the only straw of consultation has been dispended with. Instead of increasing allocations and bringing in efficiency in expenditure, reduction has become a feature of sorts. With rising cost of production, unfair competition, and subsidies to rival sectors, handloom sector is being killed deliberately. Huge cuts in yarn supply scheme allocations is bound have its impact. This impact would be double when one considers the raising costs of raw material, mostly yarn (silk, cotton, wool and other natural fibres), due to inflation, GST and fossil fuel prices.
Handloom weavers did not get any relief in the last 6-7 years, when the government has changed. They were hoping for higher allocations, especially after Narendra Modi, announced 7th August, every year, as National Handloom Day. With Make-In-India campaign, and the government leaders being followers of Madan Mohan Malaviya’s economics, they generally hoped that handloom sector would receive major thrust in government budgets. But the fourth budget is equally disappointing.
The following is the table of allocations, in comparison with previous budgets:

BJP Manifesto – Only Talk

BJP Manifesto, and the election-eve speeches of their leaders, have promised a inclusive development, sabka saath sabka vikaas. This budget has not included handloom weavers in this kind of development. Handloom sector which provides employment to more than 1 crore people gets a paltry Rs.456 crores. A ‘Make in India’ and ‘India Handlooms’ programme lie at the consumer end. Handloom weavers require basic support at production level. Their wages have to increase, incomes have to respond to living costs and families have to confidence in this livelihood.
BJP Manifesto promised to strategically develop labour intensive manufacturing. Per capita spending of the government on handloom sector, a labour intensive textile manufacturing section, spread all over India, does not exceed Rs.500. Interestingly, on a comparative basis, a spend Rs.1,000 crores on Self-Employment and Talent Utilization (SETU) looks churlish. Government’s target of encouraging self employment would have been reached with smaller investments in handloom sector. Thousands of handloom weavers are becoming poorer by the day, as their wages are not increasing.
Allocation of Rs,6,200 crores for youth, towards SANKALP and STRIVE schemes, in 2017-18, was basically to improve employment and skills. Handloom weavers employment does not seem to have same priority in government’s plan of action.

Big Promise, Tiny Deliverance

BJP Manifesto promises to “augment their traditional artisanship and entrepreneurial skill, which are a backbone of our cottage and small-scale industry - strengthening these sectors through better market linkages, branding and access to credit.” However, no proposals have been made to support beleaguered sections of society, who have been toiling for generations. Handloom weavers have been demanding for long for provision of access to low interest credit. Presently, to produce handloom products, they are borrowing money at exorbitant interest rates, ranging from normal to the bizarre, from 14 percent to 60 percent.
Previously, a Loan waiver package of Rs.2,205 crores included in the 2012-13 budget. This is a huge scale down from Rs.6,800 crore package announced previously. However, implementation levels did not exceed Rs.291 crores. Government could not reach the needy handloom weavers to relieve them of debt burden.
Debt burden on individual handloom weavers has been for multiple reasons over which they do not have any control or say. Cost of living has increased in the last fifteen years steadily, and tremendously over the last few years, generously aided by inflation and under regulation of basic food commodity prices. Cost of raw material, especially cotton and silk yarn have also gone up. Prices of yarn have been climbing continuously. Silk has been climbing rapidly in the last four years. With competition, from cheap and fake handloom products, wearing them down, handloom weavers had no way to increase their incomes to respond to raising costs of living and raw material prices.
Further, the most critical component of their production, working capital flows are drying up from ‘traditional sources’ and institutional mechanisms. NABARD the only comparatively cheap source of finances for handloom sector has drastically reduced its exposure. With the result, handloom weavers were forced to find ‘expensive’, private sources of finances. Interest rates at this level usually are higher and are not regulated. Lack of awareness, exploitative conditions compounds the misery caused by high interest rates.
In this scenario, loan waiver was a necessity and a requirement. Governments have telescopically reduced their response in this regard. From a NABARD estimation to Planning Commission estimates to government allocations to actual disbursement, entire route of government doles has failed handloom sector and handloom weavers.
With demonetization, handloom weavers are left in the lurch, with private money lenders and the banks not responding to their working capital needs. Demonetisation has dealt a big blow to the flow of capital into handloom production, and has affected even the meager income flows into handloom weaver homes. Government should have specified atleast Rs.1,000 crores for working capital support, for handloom sector, through NABARD, as a relief from the impacts of demonetization.

Only three Schemes, Tall Claims

BJP Manifesto promised that schemes will be drawn for skills upgradation and enhancement of business opportunities for handloom weavers. Instead of drawing and adding schemes, which respond to their distressed situation, handloom weavers are now staring at further reduction in existing schemes.
Long back, under the guidance of Planning Commission, government reduced the number of schemes in handloom sector, reportedly based on a NIMSME study report. From 12 schemes, they were reduced to six, and in the year 2014-15, the schemes became four. In 2015-16, there is further reduction to only 3 development schemes. On paper, there are 8 schemes, but only 3 schemes are administered for development. Inexplicably, lumpsum provision for North-east States for handloom sector has been withdrawn.

Less Allocations and Lesser Expenditures

Few years back, a Parliamentary Committee has squarely asked the Ministry of Textiles to improve its working culture, in order to increase expenditure as allocated. With no allocation in 2011-12 and 2012-13, for Comprehensive Handloom Development Scheme, an expenditure of Rs.139 crores was shown in 2012-13. However, in 2013-14, Rs.107 crores was allocated for this scheme and Rs.115.90 crores were spent. In 2014-15 and 2015-16, there is no allocation. With such discontinuity, one would wonder how this scheme is helpful for the sector. There is a huge atmosphere of adhocism in the Ministry of Textiles towards handloom schemes. There is no serious, transparent and accountable process of scheme formulation, development, implementation and review.
Overall, allocations are decreasing, revised later, expenditures are depressing and the administration remains nonchalant to the conditions of handloom weavers. Comparatively, allocations for other sub-segments of Indian textile industry which is automated, modernized, mechanized, is getting attention of government budget allocations, fully.

Allocation trends

There is nothing to be elated about handloom allocations, before and also in 2021-22.
In 1997-98, handloom sector was allocated Rs.203.50 crores, which in the next year decreased to Rs.151.60 crores. In 1999-2000, this allocation reached a lowest of Rs.138.30 crores. In 2014-15, the allocation has reached Rs.620.51 crores, reduced to Rs.486.60 crores in 2015-16 and increased to Rs.710 crores in 2016-17. And, then reduced to Rs.456 crores in 2019-20. In 2021-22, a mere paltry Rs.10 crores increase is not on par with expectations.
However, between 1997-98 and 2020-21, over a 24-year period, it is obvious that handloom sector did not receive allocations based on the dire situation of handloom weavers. Be that as it may, handloom allocations have not increased even as per minimum 10% inflationary increase is quite worrisome.
As the above graph shows, actual allocations (in blue line) have always been below the year-on-year inflationary allocation is done for handloom sector. That is, if a mere 10% addition is done to the previous year allocation, actual allocation for most years is below that. On the other hand, taking 1997-98 allocation of Rs.203.50 crores as the base, and one keeps on adding 10% increase every year, handloom allocations should have been much higher year (as the third line suggests).

Conclusion

There is no increase for handloom budget, despite huge response from handloom weavers and consumers. Previously, a cluster scheme, ‘Scheme of Fund for Upgradation and Regeneration of Traditional Industries’ (SFURTI) pertaining to Bamboo, Honey and Khadi clusters has been announced. This scheme should have been extended to all handloom clusters.
Allocations for handloom sector have been fluctuating, wildly without any rhyme, reason or accountability over the past 25 years. There is no continuity. Schemes are introduced and withdrawn. Implementation has been shoddy. Expenditure is low, even though the allocations are pittance. There is no proper need assessment for handloom sector. Not even single paisa has reached handloom weavers. Handloom funds are being soaked up by institutions, employees, corruption, bad planning and low commitment.
Problems for handloom sector in budgetary allocations stems out of the perspective of Union Textile Ministry, framed as they are in Planning Commission approaches and lobbying by anti-handloom sector groups. In general, Ministers for Textiles are from either Gujarat or Tamilnadu, which boosts the prospects for exporters, spinners and textile mill lobbying. Even Secretaries have been pro-modern textile industry lobby.
Advocates for handloom sector are divided, and do not represent themselves as a lobby in the corridors of Textile Ministry. Handloom weavers themselves are unorganized, and they have ceased to be a vote bank. For this reason, governments have been bold in denying higher allocations even in the elections years. At the same time, business lobby has become stronger and stronger. Handloom weavers are still hanging on, only because of their sacrifices.
This budget does not give hope that the new Textile Policy, under preparation by the Ministry of Textiles would give priority to handloom sector, natural fibres and primacy to environment-friendly weaving methods.
---
*Independent textile expert

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