IV. 1.

Carpets sector Overview and Exports Performance

The Indian handmade carpets industry, is an age old industry that has made significant strides in the recent past. It is highly dispersed and is spread across States like Uttar Pradesh, J&K, Rajasthan, Haryana, Punjab, H.P. etc. Immense potential exists for significant growth in production and exports. The industry provides secondary, alternate occupation to rural farming communities in their dwellings. The industry is highly labour intensive and provides employment to over 2.5 Million workers, mainly in the rural areas.

Major highlights of this sector are: It is essentially a rural based cottage industry. It requires minimal capital investment. It is highly labour intensive. It is highly export oriented. It involves very high value addition. India ranks No. 1 as a producer and exporter of handmade carpets in terms of volume. India has a market share of around 29% of total world import of floor coverings.

Exports of carpets in 2009-10 were US$ 525 million, which grew to US$ 653 million in 2010-11. The Handmade carpets industry is a major foreign exchange earner for the country. Major export destinations are USA and Germany which account for approx. 65 % of the exports. The exports during the 11th Plan is shown in Table 5.10. Table 5.10: Carpet exports in XI Plan (in US $ million) Year Export 2007-08 875 2008-09 600 2009-10 525 2010-11 653* 2011-12 800** *Projected, ** Estimated Although carpet exports have declined from the high achieved in 2007-08, there are signs of a strong revival. In 2010-11 the export growth in handmade carpets and other floor covering was (+) 24.34%.

2.

Exports and Employment target for the 12th Plan

At present the total global import of handcrafted carpets and other floor covering is US$ 2254.69 million and Indias share is 29%. Assuming that the rebound in growth continues, India should aim at a CAGR of about 15% to hold, and slightly increase its market share to around 31%. The projected targets for the 12th Plan are proposed as in Table 5.11, based on the growth potential that exists.

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Table 5.11: Carpet Exports target in XII Plan (in US $ million) Year Proposed targets 2012-13 2013-14 2014-15 2015-16 2016-17 960 1150 1350 1600 1900

Targeted CAGR (2012-13 to 2016-17): 18.61% At the end of the 11th Plan the Carpets sector is expected to employ approximately one million families with a CAGR of 0.55% over the plan period. However, upon achievement of the targeted exports during the 12th Plan, the sector is likely to generate employment for approx. 2.27 million families by 2016-17 with a targeted CAGR of 19.04% over the Plan period. 3. Strategy for meeting exports targets in the 12th Plan (i) Expanding Capacity: Infrastructure & Skill Development The following projects are under implementation / consideration for the sector in the 11th Plan period: Setting up of Expo Marts in Varanasi, Jaipur and Srinagar (Kashmir). Strengthening of the carpet cluster in Bhadohi-Mirzapur carpet belt in U.P. and in Srinagar. Opening of New Carpet Weaving Training Centres in U.P. and other craft concentration areas. Development of domestic markets by organizing shows and exhibitions at Varanasi, Jaipur, Panipat, Kashmir and Delhi Haat etc. In addition, financial assistance under MAI and MDA scheme is also available to the sector. Sector has requested increased grant under Focus Development Scheme under MAI and increased grant under MDA for participation in international exhibitions/fairs. The ongoing projects / schemes have been reviewed and it is recommended that projects which are under implementation / consideration in the 11th Plan may be continued in the 12th Plan. Efforts may be made to strengthen linkages between entrepreneurship and marketing and design development, linkage of clusters with markets and setting up of exclusive Common Facilities Centres in large and established clusters to promote its manufacturing activities.

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It is also recommended that existing MDA, MAI, ASIDE and similar schemes operated by other Ministries / Departments may be continued for the sector in the 12th Plan. Proposals for increased assistance under these schemes may be considered by the Department of Commerce for appropriate action. There is also need for opening of Carpet Weaving Training Centres for survival of the traditional art of carpet weaving Opening of more carpet weaving training centres is recommended. The possibility of linking these with MNREGA or any other existing scheme to ensure assured stipend with weavers may be explored. (ii) Exploring new markets India ranks No. 1 as a producer and exporter of handmade carpets in terms of volume. It is having market share of around 29% of total world import of floor coverings. However, carpet exports are demand-sensitive, and significantly affected by slowdown in the economies of its major markets. Hence, the relatively weak performance during the global economic crisis. The major export destinations are limited to USA (46%), Germany (22%) and the rest of the world accounts for just 32%. Thus, if we are to move to a higher growth trajectory, there is a need to explore new markets to increase export of Indian carpets and floor coverings. The overseas markets with good potential which may be targeted through various market access and promotional instruments are Gulf countries, Russia, South East Asia such as Indonesia, Malaysia, Singapore, Thailand, Hong Kong, China, Latin American Countries, South African and Other African Countries. In recent years, even major carpet manufacturing countries like Turkey and China have become increasingly important destinations for Indian carpet exports. The following strategies have been proposed to tap these markets: Market Studies / surveys. Generic promotion of Indian Handmade Carpets and other floor coverings by organizing Made in India Shows in various markets in association with local big importers/chain stores as well as by participating in established international fairs/exhibitions. Support to entrepreneurs to develop their products in line with specific consumers preferences and tastes in these markets. Invitation to buying missions to India Holding large BSMs in India and abroad. Encouraging industry to opening warehouses for direct marketing & distribution of stocks to retailers. Ensuring presence in most product specific events by entrepreneurs, even if by way of thematic participation with products for brand promotion.
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It has been noted that schemes are already in place to provide financial assistance to undertake these activities. MAI and MDA schemes of the Department of Commerce are two such schemes. It is recommended that the carpets sector should take advantage of MAI, MDA and other relevant schemes run by other Ministries / Departments to promote exports to untapped markets. (iii) Financial incentives/concessions The Carpets exporters have sought the following financial incentives for the promotion of exports: Export Credit Guarantee Corporation Ltd. (ECGC) coverage to Carpet Exporters- Claims of carpet exporters who have been provided insurance cover under ECGC may be settled on priority once coverage is provided. The premium charged for policy cover from carpet exporters may be reduced by 50%. Pre-shipment should also be covered under ECGC cover. Exemption from payments of service tax: Waiving of service tax in relation to business exhibitions [RBSMs] organized within India and waiving of service tax on membership fees of the Council. Continuation of GSP benefits to carpets and other floor coverings: Withdrawal of increase in processing fees for certificate of origin for Indian exports under generalized system preferences (GSP) scheme Increase in duty Drawback Rates: As per the new all Industry Rate of Duty Drawback for 2010-11 announced on the 17.09.2010, the Drawback Rates have been decreased across all carpet categories. Drawback Rates may be increased keeping in view the increase in prices of raw-materials. Extension of interest subvention of 2% beyond 31.03.2011 Non-recovery of drawback paid in case of non realization of proceeds Conditions like ECGC cover, RBI consent and Foreign office certification may be relaxed and fulfilment of any two conditions by exporters may be mandated. Recovery of drawback paid should not be done in case sale proceeds are not realized. Re-introduction of 80HHC specially for carpet and cottage sector. Removal of 1% Excise duty on handmade carpets imposed in the Finance Bill, 2011. Liberalization of labour laws for cottage based carpet industry on par with Agricultural Industry.

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These issues relate to a number of Ministries/ Departments, such as Ministry of Finance, Ministry of Labour and Employment, DGFT etc. It is recommended that these may be taken up with the concerned Ministries/ Departments.

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