India's apparel exports to UAE decline 33% on higher import duty

India has lost over a third of its apparel and garments exports to the UAE in FY19, due to the 5 per cent import duty levied by the Gulf nation to restrict trading activity and encourage local manufacturing.

Data from global consultancy firm Wazir Advisors suggests India’s cumulative apparel exports to the UAE declined by a steep 33 per cent to $1.78 billion from April 2018-February 2019, versus $2.66 billion in the corresponding period last year.

As a matter of practice, exporters were shipping their consignments to the UAE for repackaging and distributing to neighbouring countries.

“Indian exporters were using the UAE as a gateway for apparel shipment to the Middle Eastern countries, Africa and Europe. However, the UAE government levied import tax a few months ago on all merchandised products, including apparels. On the contrary, apparel exports to the US and Europe are increasing. Therefore, the decline in apparel exports to the UAE was majorly compensated for,” said H K L Maghu, chairman of the Cotton Textile Export Promotion Council (Texprocil).

India’s overall exports of apparel or readymade garments were marginally lower at $16.1 billion, compared to $16.7 billion a year ago, according to data from the commerce ministry.

According to industry sources, Indian exporters enjoyed a robust banking system between the UAE and African countries. Now, individual countries in Africa have developed their own strong banking systems. 

Consequently, importers in African countries have started approaching Indian apparel exporters directly. 

“Thus, India’s direct apparel exports to African countries have improved. With this, India’s direct shipments of apparels have jumped significantly to African and European countries, at the expense of the UAE. This trend is likely to continue,” said Rahul Mehta, president of the Clothing Manufacturers Association of India (CMAI). Direct shipment to consuming countries, however, leads to lower delivery time, said Mehta.

Most important is the fact that there has been no major cost advantage or arbitrage of India’s apparel exports directly to importing countries in Africa or Europe.