Higher incentive and cut in duty for textile exports to lessen trade deficit with China

The Cotton Textiles Export Promotion Council (Texprocil) has urged the ministry for higher incentives including 5 percent duty reduction for exports to China. This incentive will help to put another USD 7 billion worth of fabrics and home textiles into China and reduce the trade deficit of USD 32 billion with China.

India has a USD 32 billion trade deficit with China, in which USD 12 billion worth of imports are allowed to come into India either duty free or at concessional duties. India on the other hand has not acquired any reciprocal benefit.

Texprocil Chairman Manikam Ramaswami said that they have urged the ministry to seek 5 percent duty reduction from the present 10 percent for fabrics and home textiles. They seek higher incentives to boost cotton textile exports to China and Europe.

Pakistan allows duty free import of textile machines from China and in return enjoys duty free access to fabric market in China.

China is the largest textile country, accounting for 30 percent of global trade. China imports over USD 20 billion worth of cotton textiles of which India’s share is only USD 3.5 billion.

Indian cotton prices have remained higher than international cotton prices since February. With cotton prices higher than international prices – 70 percent of its sale value of yarn is cotton cost – it is extremely difficult even for the highly efficient spinning sector to export its products.
Due to this cotton textiles registered negative growth of 4.95 percent at USD 2,461 million in quarters ended June, 2014.

While, yarn exports also showed negative growth of 13.15 percent and made up 6.73 percent in the June quarter due considerable jump in local cotton prices.

The home textile exports also got impacted as main competitor Pakistan in main market (EU) gained zero duty access, against 9.6 percent customs duty for products from India.

Despite local cotton prices ruling 10 percent higher than international prices and deceleration in exports in June quarter, Texprocil hopes to achieve exports target of USD 13.5 billion in FY 15 from USD 11.8 billion in FY 14.