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25% drop in winter season garment export orders

27
Nov '08
An apex body of garment exporters today called for a hike in duty drawback rates, research and development assistance of 6 per cent and income tax exemption for five years to offset the huge losses piling up due to current global economic slowdown.

The Apparel Export Promotion Council (AEPC) also demanded interest-free loans for investment in machinery with zero-duty import of capital goods scheme, lower fringe benefit tax as applicable to the information technology sector and a stable exchange rate. AEPC chairman Rakesh Vaid said exports of readymade garments in the current fiscal year (2008-09) are likely to fall 24 per cent short of the 11.62 billion dollar target and may total up to 8.78 billion dollars.

In 07-08, India exported garments worth 9.69 billion dollars, over nine per cent than in the previous year. But the current financial meltdown in the United States and Europe is impacting the Indian industry heavily with lakhs of workers being laid off their jobs.

"The expected performance is thus expected to be only 76 per cent (8.78 billion dollars) against the target of 11.62 billion dollars set for the year 08-09," said Mr Vaid. "It will be just 91 per cent of the actual achievement in 07-08."

There has been about 25 per cent drop in the winter business during April to September this year as compared to the corresponding period of 07-08, he said. "Many importers have cancelled orders or postponed their delivery schedules. The market sentiment is very weak."

According to industry estimates, nearly 700,000 workers in the clothing and textile sector have lost their jobs in the past five months. By March 2009, another 500,000 could lose their work due to falling sales overseas. The sector generally employs about 33 million people directly and another 55 million indirectly. Of these, 7 million are involved in readymade garment manufacturing -- 3.9 million for exports and the rest for domestic market.

Mr Vaid said while other countries are changing fiscal and monetary policies and giving aid packages to generate new employment opportunities, the Indian government has not reacted so far. "If no steps are taken now, then March 2009 will be too late and there could be a huge unemployment problem in the sector."

In April 2008, apparel exports jumped to 878.32 million dollars (Rs 3,515 crore), up 26.82 per cent in dollar terms (20.42 per cent in rupee terms) from 692.53 million dollars (Rs 2,919 crore) in the same period last year.

The upswing fluctuated in next three months. In August this year, however, exports dropped marginally to 783 million dollars, down 0.63 per cent from 788 million dollars in August 2007. But September saw a sharp decline of 6.59 per cent with garments worth 651 million dollars being exported compared to 697 million dollars in September 2007.

Due to rupee depreciating against US dollar, the results were positive in rupee terms with apparels worth Rs 2,980 crore being exported in September (up 5.97 per cent from Rs 2,812 crore last year) and Rs 3,360 crore in August, up 4.41 per cent from Rs 3,218 crore last year).


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