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How a $3 trillion Indian economy is hurting the country's textile exports

Since India has reached that GDP threshold, textile units in the country no longer enjoy the soft duties applicable to the competition in Bangladesh, Pakistan and Vietnam

Textile Market  |  Indian Textile Exports  |  World Trade Organisation

Dilip Kumar Jha  |  Mumbai 

textiles, clothes, garments

The central government might consider more incentives for textile exporters, to bridge the gap between costing of products originating from the world’s least developed countries and India. The industry has given a representation.

Under the global preferential treatment rules in this regard, textiles imported from countries such as Bangladesh, Pakistan and Vietnam are preferred over those from India. The earlier extension to Indian exporters of lower import duty in developed countries, including America, is no longer available. The reason is the growing size of the Indian economy — it has crossed the threshold size in this context, of $3 trillion in Gross Domestic Product. We had become the world's six largest on this measure in 2017.

The total in differential duty works out to nearly nine per cent s between products from India and the other smaller economies. With all the present incentives offered by the government and the rupee's recent depreciation, the total duty differential works out to five per cent, on which the government recently announced a two per cent export incentive under the Merchandise Exports from India Scheme.

ALSO READ: Margins of textile mills buoyed by cotton price fall, but hurdles lie ahead

The US government has complained about the INdian incentives at the World Trade Organization (WTO), as legally unsustainable. has set up a committee on the issue.

“We want this MEIS incentive to be doubled to at least four per cent. Given the marketing skill of ndividual exporters, India would be able to bridge the gap fully, enabling us to boost shipment. Without this increased MEIS, the industry would not be able to compete with the preferentially treated countries, including Bangladesh, Sri Lanka and Pakistan,” said Siddhartha Rajagopal, executive director, The Cotton Textile Export Promotion Council (Texprocil). He said the industry had given the government a representation in this regard.

At an awards ceremony, Union textiles Minister asked Texprocil to reach out to the micro, smll and medium-sized (MSME) units in the sector, about a third of the Council's membership. She wanted these businesses to know, she said, that banking institutions have been given only 59 minutes for in-principle approval to loans for small traders and organisations.

ALSO READ: Migrants' exodus from Gujarat to reduce India's textile output by 10-15%

Expressing joy at the 26 per cent growth of cotton textiles this year, the minister stated this sets a benchmark to double the growth next year. She noted the interest subvention on pre-shipment and post-–shipment finance for export by MSMEs had been increased from three to five per cent.

Under the package, MSMEs registered under the goods and services tax will get a two per cent interest rebate on incremental loans up to Rs 10 million. A web portal has been launched through which such units may avail of loans up to this size. The segment accounts for about 45 per cent of the sector's manufacturing output and around 40 per cent of export.

"The announcements have certainly come as a huge relief for the sector. The majority of them being in the informal sector, they find it extremely difficult to raise funds for their business activities, as credit appraisal is a major challenge,” said Ujwal Lahoti, chairman of Texprocil.

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First Published: Sun, November 04 2018. 16:23 IST