New FTP is theoretically good, GEA President

02 Sep '09

4 min read

Comments of Mr. G.S Madan, President, GARMENTS EXPORTERS ASSOCIATION (GEA) on the new foreign trade policy 2009: The foreign trade policy announced by Commerce and Industry Minister, Mr. Anand Sharma has been given a lot of thought and the outcome is a good policy theoretically but lacking a certain practicality as far as the apparel export trade from the country is concerned.

There are good features in the policy which are laudable but the various linked Ministries have to ensure their proper implementation.

It cannot be denied that 90 percent of the garment exporters from the country belong to the medium and small scale sector employing the largest number of work force in the value chain, using 100% indigenous textiles and materials and adding the highest value to the end product exported.

The traditional markets of export of USA and EU jointly account for over 80% of the country's apparel export. Both USA and EU are in the process of coming out of recession and to offset the bad market situation prevailing there the policy earlier had granted 2% market linked duty credit scrip which is now slated to be withdrawn from 30th Sept '08. This definitely is not the right time to withdraw the support because as it is we are being out priced by other countries in supply of garments and in the absence of any support we would tend to lose out on customers we may have painstakingly established over many decades. In view of this the duty credit scrip for USA and EU must be continued for another year and then reviewed.

Also it has to be noted that the addition of new countries in the market linked development scheme is a welcome measure as a long term policy but for the apparel trade to establish itself in these countries will take quite some time considering their demographics, purchasing power and our apparel export product profile, which at present is not in tandem with their present requirements because of various factors. The Indian garments for exports are mostly value added and hence higher in value but smaller in volumes. This kind of product would not be widely saleable in the new markets as announced in the Policy and there would be a long gestation period to establish a foothold in these markets.

As apparel exports stand today the markets of USA AND EU have evolved and grown over more than the last 35 years aided very largely by a large number of NRIs who had settled in these countries. In basic garments for export we are presently being out bid in prices by our neighbouring countries like Bangladesh, China , Vietnam, Sri Lanka and Combodia and so on. It may be noted that the exports from these countries are increasing to USA and EU and at the same time our exports are declining there. So It is very imperative that we do not get out priced in our traditional markets of EU and USA in the near future because once we lose our customers to other supplier countries it would be next to impossible to get them back and as the saying goes 'A BIRD IN HAND IS BETTER THAN TWO IN THE BUSH'. Considering the declining world trade scenario this is not the right time for such a move.

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