TEXTILE and apparel producers are worried about the continuing decline in exports of these products from India in recent months, despite the government’s efforts to boost the sector.
The Confederation of Indian Textile Industry (CITI) says textile and apparel exports fell to Rs186 billion in January 2018, a sharp 13 per cent decline over the corresponding month in 2017. Textile exports (at Rs97bn) fell by 13pc, while apparel exports plunged by 14pc.
Cumulative exports of textiles and apparel from April 2017 to Jan 2018 were also down by 4pc at Rs1.87 trillion.
Industry leaders are doubtful that the country would achieve the export target of $45bn in fiscal year 2018, which ends on March 31. Sanjay Kumar Jain, chairman, CITI, says exports fell by a hefty 40pc in Oct 2017, followed by sharp drops in November and December as well.
“We may find it difficult to maintain last year’s exports of $40bn,” says Jain. And CITI has been knocking at every door, from the Prime Minister’s Office to the textile ministry for immediate restoration of export incentives for cotton yarn, “the most vulnerable sector at this juncture,” adds the CITI chairman.
India’s cotton yarn exports have fallen by more than 26pc between 2013-14 and 2016-17, despite the addition of over 3 million spindles and 62,000 rotors spinning capacity during the period, he adds.
The industry blames embedded duties of more than 5pc for the sharp decline in exports. Other key factors straining Indian exports is the appreciation of the rupee against the US dollar and the preferential treatment that importers in the developed world give to exporters from the least developed countries.
The industry also complains of a surge in imports of textiles because of the sharp reduction of import duties following the introduction of the Goods and Services Tax (GST).
Import of textile yarn, fabric and made-ups shot up by 15pc to almost Rs100bn in the April 2017-Jan 2018 period.
The Textile Association of India says the surge in imported textiles is causing problems within the country, especially for small and medium enterprises (SMEs) operating in the sector.
Arvind Sinha, the president of the association, points out that imports of garments from Bangladesh have surged by 50pc thanks to the low import duties, while exports are declining sharply. Imports from Indonesia and Vietnam are also growing at a rapid pace.
Textile manufacturers also complain that though the effective GST on fabrics is 5pc, it actually works out to 8-9pc because of non-refund of excess input tax credit. Importers though pay just 5pc IGST.
Another factor that is causing concern is the sharp spurt in cotton prices, which is forcing Indian textile mills to import the commodity. Textile mills are increasingly dependent on US exporters of cotton; imports might top the official estimate of 1.7m bales this fiscal.
The US Department of Agriculture expects a drop in Indian cotton production and a fall in sowings. Cotton prices in the US are expected to drop by 12pc next season, despite a surge in Chinese imports.
THE textile industry in two key states — Tamil Nadu and Punjab — is unhappy with the way things are shaping up for the sector in India.
Exporters in Tirupur in the southern state of Tamil Nadu are disgruntled over the manner in which the setbacks are being tackled. Apparel exports fell by 14pc in rupee terms and 8pc in dollar terms in January.
Industry leaders are doubtful that the country would achieve the export target of $45bn as textile and apparel exports fell to Rs186bn in Jan 2018, a sharp 13pc decline over the corresponding month in 2017
According to a spokesperson for the Apparel Export Promotion Council, orders for the products are good during the first three months of the calendar year, but this year has been different. “Exporters are cutting back on orders because of the financial crunch,” says the spokesperson.
The Tirupur Exporters’ Association complains that while the industry makes mandatory payments every month, the refunds from the government are pending for long, creating a financial crisis.
More than half the garment exporters have not got the rebate of state levies — amounting to nearly Rs20bn — from the government since July last year, says an association spokesperson.
In Punjab, which has more than 12,000 units engaged in the production of apparels, ginning, spinning and knitting, exporters have similar complaints about not getting GST refunds from July last year.
Manufacturers are struggling with the funds crunch as the government has failed to compensate them by giving GST refunds, says HKL Magu, chairman, Apparel Export Promotion Council. While domestic manufacturers are finding the going tough, supplies from Bangladesh are flooding the markets, as they are cheaper by 15pc.
The Indian government, which expects a surge in exports in 2018-19 following the unveiling of a special package for the industry, feels that the industry needs to inject in the promised funds into the sector.
Kavita Gupta, textile commissioner in the ministry of textiles, said recently that the industry had earlier promised to inject Rs800bn and provide jobs for 10m people over the next three years.
Unfortunately, over the past two years, it has invested a mere Rs70bn and just 100,000 new jobs have been created.
While the textiles and apparel industry has witnessed flattish growth for much of fiscal 2017-18, the government expects it to expand by 10-12pc in the new financial year beginning April 1. The government also expects textile exports to grow because of the special package that it is offering the sector.
In his budget last month, finance minister Arun Jaitley raised the special package to the industry by almost 20pc to Rs71.5bn to boost exports.
Industry bodies including the Clothing Manufacturers Association of India and the Apparel Export Promotion Council, welcomed Jaitley’s moves, predicting that it would boost exports from India.
According to Ashok Rajani, chairman, Apparel Export Promotion Council, a previous announcement by the government had resulted in a nearly 15pc rise in exports. Rajani believes that Jaitley’s announcement would also boost employment of women in the sector.
Published in Dawn, The Business and Finance Weekly, March 5th, 2018