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Speed up FTAs to boost India’s global competitiveness, says SIMA chairman

 

Speed up FTAs to boost Indias global competitiveness says SIMA chairman

 

SIMA’s newly elected chairman Ravisam, has urged the government to expedite the process of signing FTAs with new countries. He says, though most global brands and buyers prefer Indian textiles and clothing for their robust quality and other advantages, India has not been able to increase export orders due to the lower prices offered by countries like Bangladesh, Vietnam, Pakistan, Cambodia, Sri Lanka, African countries, etc. Also, the SAFTA agreement signed by India long ago allows Bangladesh and other countries to dump their garments in India at zero duty. Therefore, India needs to introduce the ‘Yarn and Fabric Forward Rule’ rather than value addition and Rule of Origin help us gain advantage, points out Ravisam.

India’s textile exports have suffered due to various tariff and non-tariff barriers, coupled with logistic and external trade policies like GST, opines Ravisam. On the other hand, with $30 billion exports, Vietnam has emerged as a leading exporter to countries like China, Korea, Japan and Taiwan. Vietnam is also world’s leading textile importers, having imported over $15 billion worth fabrics last year. However, India’s share in Vietnam’s imports is negligible. It imports yarns from India at 5 per cent duty while fabrics are imported at 5 per cent, 6 per cent and 12 per cent duties respectively. Hence, FTAs with EU, UK and Canada will ensure a level playing field for home textiles and garments, he adds.

High import duties make India’s textile exports uncompetitive

Currently, India’s exports to EU and UK at 9.6 per cent duty and to Canada at 15 per cent duty that makes them highly uncompetitive compared to countries offering zero export duties like Bangladesh, Vietnam, Cambodia, Sri Lanka and Pakistan. Therefore, Ravisam has urged the government to explore early harvesting program during pre-negotiations scoping phase of the Enhanced Trade Partnership for zero duty. India and UAE also plan to sign a FTA with the Gulf Cooperation Council countries, the second largest destination for India. To be concluded by March 2022, the CEPA agreement will create more opportunities for India.

Enhanced GST rates to surge garment prices

Racisam also emphasized the need to address duty inversion in certain segments. Being entirely seamless, the cotton value chain does not need to address any issues. However, the manmade fiber value faces duty inversion where fiber attracts 18 per cent while yarn attracts 12 per cent and fabrics and garments attract 5 per cent GST. The government’s decision to increase GST rates from 5 to 12 per cent for fabrics and garments priced below Rs 1,000 may increase the price of garments steeply. It may also have a serious impact on the handloom, powerlooom and other MSME sectors that currently form 85 per cent of India’s total textile production. Ravisam also recommends a 5 per cent GST on the entire MMF value chain. This would enable the government to refund accumulated ITC for the few fibre producers.

Duty exemption to boost cotton exports

He also urged the government to withdraw 10 per cent import duty on cotton, as the country imports only 11 to 15 lakh cotton bales against the total consumption of 330 lakh bales a year. India’s cotton imports mostly include the Extra Long Staple Fibre like American PIMA, Egyptian GIZA for producing value added products and supply to nominated business of global brand.

The total value of India’s cotton trade is Rs 75,000 crore including Rs 25,000 crores exports and provides jobs to over 12.5 lakh people he says Ravisam. Cotton prices in India during off season severely affected the MSME sector, he adds. The prices of Sankar-6 cotton price increased from Rs 41,600 - to Rs 54,500 and DCH price increased from Rs 53,000 to over Rs 1 lakh per candy. This has destroyed export commitments of fabrics, garments and made ups producers in the country. Hence, the government needs to exempt ELS cotton from import duty, he emphasizes.

 
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