Its’s heartening to know that India has become the world’s sixth-largest economy, pushing France into seventh place, according to the latest World Bank data for 2017. Global trade architecture is rapidly changing as major economies have put up protectionist barriers. Believe it or not, ‘trade war’ has become a common term this year.
Indian government and the textile industry have already started feeling the heat of the situation as the United States continues to remain the largest market for its textiles and apparel. The dialogue of FTA with EU also seems to be in jeopardy and would hardly fetch any result now. It would be beneficial both for the government and entrepreneurs to make every possible effort to widen India’s export market, reduce dependence on the United States and explore new areas where it has not embarked upon for selling their products.
However, all that is not so gloomy as Indian textiles has posted a significant growth in June 2018, but the apparel sector in particular is a cause of worry for the textile sector. Hit hard by rising cotton prices coupled with issues such as GST, reduction in duty drawback rates and remission of state levies, the readymade garment exports (RMG) in the first three months of current fiscal (April to June) have declined by 16.57% to Rs 27,103 crore as compared to Rs 31,594 crore in the same period of last fiscal year.
Addressing the issue of rising imports by increasing import duty on certain textile and apparel products from 10 to 20 % is a very positive and affirmative move by the Government and has given a major relief to the garment and carpet manufacturers as they were going through tremendous pressure post GST. However, the problems of the industry are not yet over. There is a big issue of imports from Bangladesh where there is full exemption of Basic Customs Duty and thus, makes it a gateway for Chinese fabric entering into India duty free. This is because no rules of origin, yarn forward and fabric forward rules are in place for duty free imports from Bangladesh and Sri Lanka with whom we have free trade agreements.
Ever since the launch of MCX Cotton futures, the cotton industry has immensely benefited from this hedging tool that provides protection against price uncertainty and a robust delivery platform. This adds to sustainability of businesses especially SMEs which play a major role in textile sector, which is one of the largest contributing sectors in the economy of the country. CITI has also requested to the Government to support industry to have a global cotton contract in place to protect Indian players from the price fluctuations that result into losses due to fluctuation in cotton prices in international markets.
Meanwhile, CITI hails Government for amicably resolving transport strike as it has affected the industry as a whole. Also, the 28th GST Council meeting has brought some cheers to the textile industry. A slew of measures in making the GST system more robust and hassle-free will have a major effect on the Indian economy and will strengthen domestic as well as export sector. The decision of refund of accumulated credit on account of inverted duty structure to fabric manufacturers in particular was the need of the hour as fabric sector is already facing a lot of difficulties due to GST and while competing with its counterparts in international market. However, the notification towards the above decision is a conditional notification wherein it has been provided that “refund would be permissible provided the accumulated input tax credit lying unutilized in balance, after payment of tax for and up to the month of July 2018, on the inward supplies received up to the 31stday of July 2018, lapsed”. This will lead to huge losses and adversely impact the textile industry. As for the overall growth of the textile sector, fabric plays an important role and it also generates a sizeable employment opportunities – around 30-50 jobs on 1 crore investment – which is more than any other segment of the textile value chain. CITI has sent representation to Hon’ble Finance Minister to relook into the same and kindly consider adjusting it against GST liabilities.
Besides, CITI has made a few more representations to the Government on rising textile imports, falling apparel exports, early resolution of committed liabilities under various TUF schemes, simplification of A-TUFS norms, etc. I do hope, I would be able to give the readers and the textile industry some good news in this regard.
Yes, I would be failing in my duties if I don’t mention a few words about “InnoTex” an innovation contest that CITI is organising for the first time on textiles. In brief, the contest will invite applications on innovative ideas/concept that has been devised for best design, method, process & product in any area from Ginning to Garment. An advertisement is there in the magazine giving all the details of the event. I request your kind support and participation in making it a grand success. This is part of our Diamond Jubilee Celebrations, for which we are also organising a CITI Global Textiles Conclave during November 27-28, 2018.