Garment Exporters Association has called for anoverall reduction in interest rates and corporate tax rates, besides removalof anomalies in excise and custom duties to reverse the recent slowdown ingarment export industry. As the international market, which was already highlycompetitive, has become more tough, GEA in its PreBudget recommendations hasrequested the Government to reduce the transaction cost and grant necessaryfiscal and commercial relief for the garment sector of the textile industry toenable it to face increasing international competition.

According to Rakesh Vaid, President, GarmentsExporters Association (GEM, the basic objective of the budget should be to makeexports competitive as well as profitable. The GEA hopes that followingPre-Budget recommendations would receive due consideration of the FinanceMinister while finalizing the Budget proposals:-


  1. To hike duty drawback rates by 5 per cent by increasing the scope and coverage of duty drawback scheme so as to ensure full reimbursement of Excise duties, Custom duties, Service tax, education cess and various state level taxes.
  2. To provide adequate and need based funds to exporters at reasonable rates of interest which should not exceed 7 per cent as applicable to agriculture sector and restore 4 per cent interest rate subvention on export credit.
  3. To restore 100% exemption to export earnings under Section 80 HHC of Income Tax Act atleast for the next five years.
  4. In view of acute power shortage, Government should encourage captive power generation by providing diesel at International prices and exempted from Excise duty and local levies.
  5. To exempt from Service tax all the export related services to avoid blockage of capital of exporters, as the procedure for refund is time-consuming, resulting in unnecessary delays and harassment.
  6. GEA would like the Government to implement GST (Goods &Service Tax), at the earliest.
  7. The Custom duty on import of textiles machinery, accessories and fabrics should be abolished allowing free import at nil rate.
  8. Import duty on man-made fibres to be reduced to zero, so that the garment exporters can get cheaper man-made fabrics available in the country for manufacture and export garments at more competitive prices.
  9. The Government should also arrange refund of State levies on exports, amounting to 6% of f.o.b. value.

Vaid haspointed out that that the withdrawal of certain tax exemptions and fiscalbenefits earlier granted by the Ministry of Finance have already adverselyaffected the export performance and reduced competitiveness of Indian garmentexporters In international market.

  1. Apart from taxation relief, GEA would expect the Government to reduce the transaction cost by simplifying administrative procedures by avoiding delays at customs clearance of goods; improving loading and unloading of cargo and infrastructure at ports to avoid congestion at various ports.

Vaid has pointed out that that the withdrawal ofcertain tax exemptions and fiscal benefits earlier granted by the Ministry ofFinance have already adversely affected the export performance and reducedcompetitiveness of Indian garment exporters in international market. Thegarment ex-porters are still facing crisis because of worldwide recession andlow unit value realization from the overseas market and it would take some moretime for the world economy and the apparel trade to revive the worst everglobal slowdown which started during 2007-08 and intensified to a crisis in2008-09.

He further pointed out that GEA has alreadydrawn the attention of the concerned authorities regarding difficulties beingfaced by garments exporters because of global economic slowdown, adverse fiscaland commercial policies of the Government of India. He said that Indian economyis passing through a critical phase of uncertainty, transition andrestructuring. It continues to be under severe strain because of demandrecession and declining trend in industrial production and exports. He pointedout that increasing input cost, tight credit policy and high interest rate,severe liquidity crunch, rigid and outdated labour laws, poor infrastructureand high transaction cost, high power cost and frequent power cuts have causeda setback to industrial production and exports. The recent steep hike in fabricprices have also affected the competitive strength and performance of Indianapparel industry. He also said that the time has not yet come to withdraw theconcessions provided to the exporters as the main problem confronting theexport sector is recent steep hike in production and transaction cost andongoing fluctuations in the rupee rate against dollar.

He stressed the need for bold textile policiesand effective measures to revive the Indian exports and pointed out that the Indianapparel industry, one of the most dynamic sectors of the Indian economy willcontinue to playa very significant role in economic development of the countryas the Government of India has recognized the importance of this labourintensive industry as the focus area to meet the challenge of generating moreemployment during the Eleventh Plan period.

Originally published in The Stitch Times: February 2010