The apparel industry is upbeat on talks for a free-trade agreement (FTA) between India and the European Union (EU). Reeling under competition from Bangladesh and China, the industry believes the FTA would give it price parity with its competitors and raise exports to Europe by 30-40 per cent.
Currently, Indian apparel exporters have to pay an 11 per cent duty to sell their products in EU; India charges 30 per cent import duty on garments from EU. If the EU FTA materialises, both regions would do away with the duties. Currently, EU does not charge any duty on garment imports from Bangladesh; for garment imports from China, it charges seven per cent duty. "If the EU-FTA happens, it would be a major boon for the garment industry in India. It would provide a level playing field to India vis-a-vis other garment-exporting countries such as Bangladesh. Currently, we have to pay 11 per cent duty on garments exported from the country," said Naseer Ahmed, managing director of Scotts Garments.
"If we have price parity with Bangladesh, it would give a tremendous boost to the industry. Apart from new orders, the FTA would result in existing EU customers increasing their share of apparel imports from India. The signing of the agreement would easily result in 30-40 per cent growth in apparel exports from India to EU," says Rahul Mehta, president, Clothing Manufacturers' Association of India.
Industry experts say India exports apparel worth $5 billion (about Rs 27,000 crore) to EU, while Bangladesh exports apparel worth $8 billion (about Rs 43,400 crore) to the 27-nation bloc.
"Indian apparel manufacturers would be large beneficiaries, as we have to compete with countries such as China and Bangladesh. The EU FTA would bring us on a par with these nations, especially Bangladesh, which exports its apparels duty free to EU," says Premal Udani, chairman and managing director of Kaytee Corporation and former chairman of Apparel Export Promotion Council.
The FTA would also help generate about three million jobs in the textiles and garments export sectors.
If the FTA is signed, prices of garments imported from EU to India would fall. "Currently, India charges 30 per cent import duty on apparel imported from EU. Once that is gone, apparel imported from EU is likely to be cheaper by 30 per cent," says Udani.
This would also boost sales of apparel imported from EU," says Udani.