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India loses out in global apparel exports to Vietnam, Bangladesh

India has not been able to take advantage of improving global environment, especially compared with its Asian peers. Though export growth has recovered relative to the past few years, at 9.4 per cent, it appears sedate compared with Vietnam’s 23.8 per cent, South Korea’s 18.4 per cent and Indonesia’s 17.8 per cent.

GST has disrupted many businesses, at least in the short run. Under GST, exporters are supposed to first pay tax on the inputs they buy from suppliers and then claim tax refunds. Delay in refunds has shrunk liquidity, especially for small and medium enterprises, which contribute almost 40 per cent to exports.

Exports of gems and jewelry declined 6.8 per cent in April-October. Exports of readymade garments, leather products and electronic goods grew 2.5 per cent, 0.6 per cent and 2.8 per cent respectively. Vietnam and Bangladesh have been able to occupy a larger share in the low-end manufacturing space being vacated by China as it moves up the sophistication ladder. For instance, Vietnam’s share in global readymade garment exports has soared from 1.7 percent to 5.3 percent in the past decade, and that of Bangladesh from 2.5 percent to 6.7 percent while India saw a mere 0.8 per cent improvement. Lower comparative advantage has been a result of infrastructure bottlenecks, rigid land and labor laws, and inferior logistics compared with these economies.