The cotton yarn price increase by Rs. 20 per kg last month has literally pushed the garment export sector into a difficult situation. The garment export sector has been passing through a challenging business environment further to implementation of GST and this could be apparently witnessed from the continuous declining of exports month-on-month basis since October 2017. The most worrying factor is that the negative trend in exports growth is continuing in the current financial year also and the average decline of knitwear exports in the month of April-May was 34 per cent.
Further, the increase in yarn prices would derail the industry and the aftermath effect would be severed as not only the garment sector will get affected but also there will be a boomerang effect on the textile mills. Considering this crucial concern, the industry has appealed to the textile mills not to increase the cotton yarn prices and also not to stop cotton yarn supply.
However, the industry has welcomed the Govt. decision to increase import duty on 76 textile and apparel items at 6 digit level to protect the domestic manufacturers from rising imports. The import duty, which was earlier 10 per cent, will now be 20 per cent for these items. It is a very positive move by the government and has given a major relief to the garment manufacturers.
But there is a big issue of imports from Bangladesh where there is full exemption of Basic Customs Duty and hence it is a gateway for Chinese fabric entering India duty free. Hence, it is suggested that the government may consider imposition of safeguard measures such as Rules of Origin on the countries that have FTAs with India to prevent cheaper fabrics produced from China routed through these countries.
Meanwhile, the textile and clothing industry has welcomed the GST Council’s decision to allow input tax credit refund, a long-pending demand of the textile industry. These initiatives would help revival of the apparel export sector.
In between, Indian domestic market performed better during the first quarter of the current fiscal. Domestic apparel market was estimated at $67 bn in 2017 and it has grown at a compounded annual growth rate (CAGR) of 10 per cent since 2005. Owing to strong fundamentals, the domestic apparel market is expected to grow at 11-12 per cent CAGR and reach about $160 bn by 2025.