India to continue sops for textile exporters despite US demand to do away immediately

Washington argues that New Delhi no longer qualifies to give concessions for textile exporters under the World Trade Organisation (WTO) rules as it attained export competitiveness in the textile sector eight years back. But India has decided to continue with export sops for the sector in the new fiscal and, probably, the following two years as well.

Despite the US demanding that such incentives be done away with immediately. India will stick to its stand, the Centre will not feel compelled to withdraw export incentives for the textile sector while announcing the Budget (for 2015-16) or the Foreign Trade Policy.

As per WTO’s Agreement on Subsidies and Countervailing Measures, export subsidies can be given only by countries that have not attained export competitiveness, which is defined as attaining a 3.25 percent share in world trade for a product for two consecutive years. Members get eight years to phase out their export subsidies once they reach export competitiveness.

New Delhi’s argument is that since the WTO undertook a computation of India’s world trade share following a member’s request only in 2011, and determined that it had retained competitiveness on the basis of data of 2009-10, it can be inferred that the phase-out period would end in 2018.

As per statistics compiled by the WTO, India’s share in world trade for textile and clothing was 4.66 per cent in 2013 with exports worth $37 billion. Textile and clothing exports contribute more than 10 per cent to India’s export basket.

India not willing to withdraw the sops right away, the Commerce and Textile Ministries have, however, started working on alternative schemes that are WTO compliant, so that export sops for the sector can be replaced over the next three years.

The US has been claiming that India need to stop their export sops for the textiles sector from 2015, but India believe that their phase-out period ends in 2018 and hence India will stick to their deadline, a Commerce Ministry official said.

The sops that will have to be phased out include the popular Focus Product and Focus Market schemes under which exports to targeted markets are incentivised, the EPCG scheme and the interest subvention scheme for export credit.