FTA with EU to increase cotton textile exports

Bangladesh imports cotton from India to produce textiles and competes with Indian exports in the developed countries

Faced with sharp decline in exports, cotton textiles exporters have urged the government the expedite free trade agreements (FTAs) with major importing countries including the European Union, Australia and Canada to remove trade barriers there.

Despite price offered by Indian exporters for their cotton textiles is competitive, preferential access being given to some countries including Bangladesh, Cambodia, Pakistan, South Korea, Turkey and Vietnam in major importing nations like the European Union is severely affecting shipment from India. Apart from that, discriminatory import duties on Indian textiles in important markets like China and Canada also hit exports from India.

FTA talks with the EU assumes significance as countries like Bangladesh import cotton and yarn from India to produce textiles and competes with Indian exports in the developed countries. Consequently, India’s cotton textiles exports reported a decline of 7.39 per cent to $863.18 million in August 2015 as compared with $932.02 million in the corresponding month last year. India’s overall merchandised exports fell ninth month in a row in August 2015.

“The continuing decline in cotton textiles exports is a matter of deep disappointment and concern requiring urgent action from the government,” said R K Dalmia, Chairman, The Cotton Textiles Export Promotion Council (Texprocil).

It is therefore, important to fast track FTA talks with the EU so that the preferential treatment given to India’s competitors would be withdrawn and cotton textiles of Indian origin be treated at par with other countries. Initiated over five years ago, FTA talks with the EU are yet to be concluded and therefore face uncertainty.

Besides, the government should consider the industry’s demands such as to include cotton textiles under the 3 per cent interest rate subvention scheme, release of funds under the technology upgradation fund scheme (TUFS), and recalibrating the product / country matrix under the newly introduced merchandise exports from India Scheme (MEIS). All these would have a direct bearing in improving India’s competitiveness in the short to medium term. This will provide the necessary stimulus to falling exports of cotton textiles in the next 200 days, said an expert from the industry.