'India promising destination for HK apparel companies'

27 Apr '16

5 min read

Among the apparel exporters, many of them produce within India's special textile parks and export processing zones (EPZs), which offer tax incentives for exports including 100 per cent VAT rebates on exports made of Indian-originating materials.

In its third article, HKTDC had noted that Indian apparel exports are subject to relatively high tariffs compared to some developing economies in Asia. Nonetheless, these import duties by themselves have not turned out to be a big deterrent to the surge in exports of textile and apparel products from India during FY2012-2014. India is among the top five apparel exporters in Asia, ranking second in the world in terms of its combined textile and apparel exports.

Thanks to such arrangements as GSP and free trade agreements (FTAs), India enjoys a higher proportion of preferential exports than China to major markets including the US. Nonetheless, India had been seen as being relatively sluggish in forging preferential trade and tax treaties, maintaining a stronger focus on steering its own textiles and apparel production to serve the domestic market. The most dramatic change came in September 2014, when the Narendra Modi government launched the 'Make In India Initiative' with the clear goal of turning India into a global manufacturing hub, creating jobs and boosting exports.

The textiles and apparel sector is one of 25 target sectors under the MIII. Under the automatic route, 100 per cent FDI is allowed for garment manufacturing in India.

Overall, Indian merchandise imported into major markets is not subject to especially high tariffs. However, textile and apparel products are considered sensitive items in a country's import tariff lines, and are thus excluded from GSP. Also in the event of an FTA being concluded, there will normally be a fairly long phase-in tariff reduction schedule. Currently, most Indian textiles and apparel are subject to import tariffs of about 10 per cent, which are similar to those applying to Chinese exports. This in part explains the keen interest of the Modi government in enhancing India's export competitiveness through securing an FTA with the EU, upgrading the FTA with ASEAN, and partaking in negotiations with Regional Comprehensive Economic Partnership (RCEP). India is also not yet a member of the Trans-Pacific Partnership (TPP) arrangement.

The article also noted that India operates a complex indirect tax system affecting many sectors and that Indian garments continue to face excise levies prior to GST implementation.

According to HKTDC Research, apparel sales are expanding in India's booming retail market.

Estimated at $600 billion currently, the Indian retail market is projected to grow at an average annual growth rate of 12 per cent to reach $1,000 billion by 2020, with readymade garments (RMG) accounting for about 8 per cent of the retail market. The article also noted changing lifestyles and the influx of foreign brands.

The HKTDC article also highlighted challenges in tapping India's RMG market. Companies preparing to sell into the domestic RMG market will require a strong handle on consumer preferences, while also striking a proper balance between achieving lower average production costs through mass production and producing more customised products to suit different tastes. It also warned of rampant counterfeiting of products. (SH)

Fibre2Fashion News Desk – India

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