Justifying such a levy, Finance Minister Yeshwant Sinha said: "There is noeconomic logic to continue with excise duty exemption on garments sold underregistered trade name."

In its post-budget review, the Credit Rating Information Service of IndiaLimited (Crisil) said the imposition of 16 per cent excise duty on brandedgarments is a logical step since the sector has been derserved from the SSIambit. It is also in the form of preemptive measure for the imposition of acounter-veiling duty (CVD) on garment imports at a later date, if required.This would result in the additional cash outflow for the branded garmentsegment.

``The budget has a number of positive announcements for the textiles sectorand this, in our opinion, would provide stability to the ratings outstandingin the sector,'' Crisil said.

However, the industry believes exactly the opposit. As the majority ofgarments industry players had enjoyed the benefit of nil excise, theannouncement of excise duty obviously jolted them.

A section of garment makers therefore, are disturbed and are up in arms tothe extent that they have begun an "indefinite strike."

After the announcement of excise levy, a number of units in Mumbai and inparts of Maharashtra were said to have stopped operations. Led by ClothingManufacturers' Associaiton of India (CMAI), leading industry representativeswere thereafter engaged in internal meetings to chalk out plans from nextweek.

Industry sources say this is bringing ``inspesctor raj'' leading theindustry to be incompetitive against rising imports from adjoining countrieslike Nepal, Bangladesh, China and South Korea. Confederation of IndianApparel Exporters (CIAE), president, Amit Goyal, said in a statement: "Thebudget proposal of 16 per cent excise duty on branded goods defies logic asjust when this industry had reached international standards and high qualitygarments were just starting to be produced in India, the proposal to put itunder the excise net is a rude shock."

Following the excise levy, the industry will be forced to hike the price,which would further lead to their being priced out against competitive,cheaper imports.

According to Mr Goyal, India's apparel and textile industry, which is one ofthe highest net foreign exchange earners for the country with around $5.6billion annually, has grown rapidly in the last decade due to the efforts ofthe small exporters and the non interference by the government.

Mr Goyal said: "Apparel industry now have to face the inspector raj andindustry has hard times ahead." While the benefits of 50 per centdepreciation on machines if bought under the Technology Up-gradation Fund(TUF) is enough to give rebirth to this industry, this will be negated bythe levying of excise duty, he added.

The Synthetic and Rayon Textiles Export Promotion Council (SRTEPC) haswelcomed the 2001-02 budget proposals announced last Wednesday.In a statement, SRTEPC chairman, Ganesh Kumar Gupta said: "The drasticreduction of basic customs duty on specified textile machines includingshuttleless looms to 5 per cent from 15 per cent, would gear up the processof modernisation of the industry and will increase the availability of fundsunder the textiles upgradation fund (TUF)." Mr Gupta added: "It is good thatthe government has also proposed to withdraw the existing system of chargingexcise duty from independent textile processors on compounded basis.

Accelerated depreciation at the rate of 50 per cent on plant and machinerybought under TUF scheme would further accelerate much needed investments andmodernisation in the weaving, processing sectors of the textile industry."All these proposals would help the industry to meet the global challenges''he said.