India has enhanced basic customs duty on 328 textile and apparel products. Import of yarn, fabric, made-ups and garments made out of manmade fibers and filaments have risen especially after GST. But these products are being manufactured in the country by a large number of factories in both small and medium and the organized mill sector.
The decision will help millions of people get employment in the manufacturing sector of the various segments of the entire value chain. But the hike in customs duty does not impact the issue of imports from Bangladesh. These imports are exempt from basic customs duty and hence Chinese fabric easily comes to India duty free through Bangladesh in the form of garments. This affects the fabric as well as other segments of the value chain.
In the last one year, apparel imports from Bangladesh increased 44 per cent. Measures such as Rules of Origin, Yarn Forwarding Rules and Fabric Forwarding Rules on countries that have FTAs with India will prevent cheaper fabrics produced from countries like China being routed through Bangladesh.
The major part of employment creation happens in the downstream industry like knitting, weaving, apparel making and made-up manufactured goods. The import duty is expected to motivate the industry to achieve ambitious targets set for the textile and clothing sector.