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As China loses share in global market for exports of apparel, leather and footwear due to rising production costs, time is ripe for India to step in and expand in the sectors, according to the Economic Survey.
However, India will have to address myriad issues including appropriate tax structure, labour regulations and high logistics cost in order to cash in on the opportunity, said the mid-year Survey tabled in Parliament today.
"In the perspective of China losing share in the global market for exports in the apparel sector on account of rising costs of production, the time is ripe for India to make forays into this market," it said.
Just like the clothing sector, the Survey said the leather and footwear sector is a highly employment intensive sector with lower capital requirements.
"With China ceding space, it is a favourable time to promote the footwear industry," it said.
The Survey, however, referred to various challenges before India can reap the benefits of this situation.
India's competitors, like Bangladesh and Vietnam, have duty free access to markets of the US, the EU and Japan for their exports, it said.
"Other challenges include high domestic taxes on man- made fabrics vis-a-vis cotton based fabrics; stringent labour regulations and high logistics cost," the Survey added.
Similarly, on footwear, it said global demand is moving towards non-leather while Indian tax policies favour production of leather-based items.
"India faces high tariffs in partner country markets in exports of leather goods and non-leather footwear," it said.
The Survey expressed optimism that with the government announcing a special package for the leather sector in the Budget of 2016-17, benefits of it would be visible in due course.
"Implementation of GST is expected to rationalise discrimination against non-leather footwear," it said.
Likewise, for the apparel sector, the Survey said the Rs 6,000 crore special package for textile and apparel sector approved on June 22, 2016 will boost employment creation, exports and investment.
Besides, increasing of subsidy under the Amended Technology Upgradation Fund Scheme (ATUFS) from 15 per cent to 25 per cent for the garment sector will also help the sector, it said.