Source: Financial Express, Jan 10, 2019
India’s textile and garment trade is witnessing an unusual trend: imports are rising at a brisk pace even as exports are falling. While the export slump is ascribed to a host of factors, including global demand slump and the continuing inability of Indian exporters to have the desired competitive edge in key markets, the double whammy that demonetisation and goods and services tax (GST) dealt to the unorganised sector, the backbone of the domestic textile and clothing industry, appears to have necessitated increased imports.
Weavers, fabric processors, texturisers and garment units in key textile hubs have borne the brunt of the twin policy steps taken in quick succession, in what impacted domestic supplies significantly.
Textiles and garment imports, as percentage of such exports, surged from just about 13% in FY14 to a record 25% in the first eight months of this fiscal. Similarly, at 1.7%, the share of textiles and garments in the country’s overall imports in the April-November period was the highest in recent memory.
On the other hand, the labour-intensive sector’s share in the overall merchandise exports has been sliding consistently in recent years, having dropped from as much as 13.7% in FY16 to just 10.27% this fiscal (up to November), the lowest in at least a decade.
In the April-November period, while textile and garment imports surged 18.6% y-o-y, albeit at a relatively low base, to $5.5 billion (despite a contraction in overall merchandise imports), exports plunged by 7.9% to $21.7 billion, showed the DGCIS data.
Importantly, imports of cotton fabrics and made-ups jumped as much as 17.3% y-o-y to $396 million, even though India has been a major player of cotton-based textiles and garments.
This suggests a Rs 6,600-crore package for garments exporters, announced in 2016, hasn’t helped much in turning the sector around, although industry executives argue the fall in outbound shipments would have been even sharper without the succour.
The decline also underscores why the timely release of benefits worth thousands of crores, which is held up, to garment and made-up exporters under two major schemes – the Merchandise Export from India Scheme (MEIS) and the Rebate of State and Central Taxes & Levies (RoSCTL) · by the government are critical, industry executives argue.
While the MEIS gains have been held up since August, benefits under the RoSCTL, meant for compensating garment/made-up exporters for various state and Central government imposts, have never been extended since its introduction in March, exporters had told FE earlier. This has exacerbated a liquidity squeeze for the exporters, who typically factor in such incentives while firming up deals – and hurt their ability to honour fresh contracts on time ahead of Christmas, the most critical season for western apparel buyers, Ajay Sahai, director general and chief executive at exporters’ body FIEO, had told FE.
Noted textiles sector expert DK Nair pitched for urgent government intervention to improve the “inherent competitiveness” of domestic manufacturing for exports to flourish, instead of just extending dole-outs. “Labour laws have to be made more flexible. Affordable and ample credit should be made available to even small players. Infrastructure reforms must be taken up on an urgent basis. Unless all these things are done, our export competitiveness will remain under severe pressure,” Nair said.Already, India has failed to take advantage of a slowdown in China’s textile and garment exports as also persisting global concerns about violations of labour norms in Bangladesh in recent years, while Vietnam has emerged as the largest beneficiary. Even Bangladesh has left India far behind in garment exports.