By: Shramana Ganguly Mehta

After losing close to 5 lakh skilled workforce to the global economic downturn, the Indian apparel export sector is hoping that finance minister Pranab Mukherjee will attempt revival through the forthcoming budget.

In a pre-budget meeting with the Union finance minister on Tuesday, AEPC chairman Rakesh Vaid sought separate budget for product development and 50% capital subsidy for garment machines, among a slew of fiscal measures to enable it to grow from current $10 billion to $18 billion by 2015 to maintain its 2.6% share in the estimated $692-billion global apparel trade market.

For achieving $18-billion export target by 2015, the sector would need investment of Rs. 1,43,000 crore, additional sewing machinery installation by 18.44 lakh and 27 lakh new jobs, Mr Vaid said in his representation.

"While as a short-term measure, the government should increase the drawback at the rate of 14.61% on fob value of exports from September 2008 from the current level of 8%, long term recommendations include budgetary allocation for product development, 50% capital subsidy for garment machines, greater funds for TUF, additional interest subvention of 4% to apparel industry, moratorium of two years for repayment of principal amount against term loan, financial support for undertaking research and development activities, among others," he stated.

India exports around 250 crore pieces of garments annually, majority of which cater to the US and EU markets. With the consumers tightening their purse strings since mid-2008, Indian exports fell 14% short of $11.62 billion target for 2008-09, leaving apparel export clusters across Gurgaon, Okhla, Noida and Tirupur with poor order books, thereby forcing retrenchment of more than 5 lakh workers during September 2008-March 2009.

Owing to inherent problems in the sector, Indian exports to US stood at $3.07 billion, while that of China ($23 billion), Bangladesh ($3.4 billion), Indonesia ($4 billion) and Vietnam ($5.2 billion) remained descent.

In fact, Bangladesh overtook India as the fifth largest exporter to the US in August 2008, while Vietnam will follow suit in 2009.

India is being edged out by competitors and our share in this growing market has been shrinking. During January-March 2009, Indian share in US apparel imports fell by 9%, while that of Vietnam grew by 5.2% and Bangladesh was up by 12.95%.

"Our position in the EU market is not satisfactory either," Mr Vaid said, adding that the rupee depreciation has not brought gains for the exporters, since a large number of them have hedged their exposure and overseas buyers are renegotiating contracts.

Written by Shramana Ganguly Mehta from ET Bureau

Originally published in "The Economic Times" dated June 2, 2009, Ahmedabad