Garment exports fall drastically by 6.5% in Sept

04 Nov '08

5 min read

“The export contracts for which foreign remittances are being received now were signed in May or June. In the absence of an alarm system for conversion rate, exporters could not anticipate the exact exchange rate,” said Mr Singh.

Overseas buyers are now renegotiating contracts due to depreciating rupee. So freight-on-board (FoB) values are falling, he added.

On the other hand, neighbouring countries like China and Pakistan are helping their industries with export incentives. On August 1, China's ministry of finance and the state administration of taxation increased export tax rebate on some textiles and apparels from 11 to 13 per cent. The move was expected to fetch additional profit of 2.6 billion dollars to the industry.

The rebate will be raised to 14 per cent on November 1, said Mr Singh. A total of 3,486 products involving labour-intensive and value-added items will benefit from the move. Chinese export-oriented companies, especially small and medium-sized firms, have seen their earnings decrease sharply due to falling overseas demand, rising yuan as well as surging raw material and labour costs.

Pakistan has reintroduced research and development assistance at six per cent for garments to boost exports. The move will ease operating pressure on companies and enhance their competitiveness.

In India, however, the government cut duty drawback rates from September 1. The rate for cotton apparel declined from 11 per cent to 8.8 per cent, for blended apparel from 11.2 per cent to 9.8 per cent and for synthetic apparel from 11.5 per cent to 10.5 per cent.

In other words, the rates have been reduced by 20 per cent in case of cotton garments, 12.5 per cent in case of blended garments and 8.7 per cent in case of man-made fibre garments.

Nearly 78 per cent of garments exported from India are cotton-based. The AEPC official called for 14.64 per cent duty drawback rate for cotton garments from September 1.

Almost 80 per cent of inputs required for the Indian apparel industry are sourced domestically compared to 50 per cent in China. India's readymade garment exports totalled 9.69 billion dollars in 2007-08.

The AEPC represents over 8,000 small, medium and large exporters in India. The country ranks as fifth largest exporter of readymade garments globally.

Apparel Export Promotion Council

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