Dilemma on textile sector incentives in India's new FTP

30 Sep '14

2 min read

In view of India’s commitment to the World Trade Organization (WTO), there is a dilemma over providing incentives to the textile sector in the new Foreign Trade Policy (FTP), expected to be announced next month.

Article 27.6 of WTO’s ‘Agreement On Subsidies And Countervailing Measures’ states, “Export competitiveness in a product exists if a developing country Member's exports of that product have reached a share of at least 3.25 percent in world trade of that product for two consecutive calendar years.”

Indian textile sector crossed the 3.25 percent threshold in 2008-09, and hence it is required as per the WTO rules that the Government phases out the subsidies provided to the sector to boost its exports by 2018.

At present, the Indian Government provides incentives to the textile and garment sector under various schemes like the focus product scheme and focus market scheme.

The Indian textile and apparel industry is aware of the WTO commitment and is preparing itself for the imminent withdrawal of incentives by the Government. However, the debate is now on whether to withdraw the incentives in a phased manner till 2018 or all in one go in 2018, when the deadline ends.

The textiles and clothing industry is one of the mainstays of Indian economy, and it contributes about 13.25 percent to the country’s total exports basket.

In 2013-14, the textiles and garment industry realized export earnings of US$ 41.57 billion. During April-August 2014, India’s textile exports registered a growth of 9.5 percent year-on-year, while readymade garment exports grew at 17.7 percent.

To create an export-friendly economy, the Narendra Modi led government has proposed to extend 24/7 customs clearance facility at 13 airports and 14 sea ports resulting in faster clearance of import and export cargo.

The Government has also increased the duty free entitlement to garment exporters for import of trimmings, embellishments and other specified items from 3 percent to 5 percent. (RKS)

Fibre2fashion News Desk - India

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