In the last five years India’s exports of cotton yarn have declined by 25 per cent and fabric exports have declined by seven per cent. Reason: duty disadvantage faced by Indian exporters in major markets. Chinese imports of cotton yarn from Vietnam or Indonesia are duty free but Indian yarn carries 3.5 per cent import duty.
The decline in exports is impacting the whole value chain from farmers, spinners to weavers and knitters as there is considerable export surplus in the country. Exports of Indian spinning mills were good during 2013-14 when cotton yarn was covered under schemes such as the two per cent incremental export incentive, the two per cent interest subvention and the three per cent focus market incentive.
However, suddenly all incentives were withdrawn, leaving spinning mills in the lurch. India’s cotton yarn exports to China have fallen 48 per cent from 2013 to 2017 but exports from Vietnam and Indonesia have increased 129 per cent and 55 per cent respectively in the same period.
Markets like the EU, China, Turkey and Vietnam impose an import duty of eight per cent to 12 per cent on Indian fabric while duty free access is given to countries such as Pakistan, Cambodia and Bangladesh.