Textile export subsidies may soon come to an end

Export today is an important tool for India’s economic development. As the Indian textile sector is said to have gone into the area of globally competitive as defined by WTO Law. A product is called competitive when its share reaches at least 3.25 percent in world trade for two consecutive calendar years. Indian textile sector has crossed 3.5 percent share in the global market and so it is not now eligible for export subsidy.

The textile sector in India is no longer eligible for export subsidies as it has become competitive. Article 27.6 of WTO ASCM agreement suggests phasing out subsidies for product, which has reached export competitiveness. Sooner or later India will see more sectors reaching to that phase. India has to move out of a purely incentive based export model to a competitiveness based export model, Rajeev Kher, Commerce Secretary said at the 4th CII Export Summit 2014 held in New Delhi.

The benefits that India enjoys at present under Annex VII of the WTO Agreement on Subsidies and Countervailing Measures (ASCM) may soon come to an end. The export subsidy is not a long term solution, to improve India’s exports it has become extremely important to focus on promoting of both ‘Brand India’ and ‘Indian Brands’.

The WTO prohibits the use of export subsidies on manufactured products as a general rule, but the countries which are listed in Annex VII of the ASCM, are exempted from the prohibition. This exemption is available until GNP per capita of a country reaches USD 1,000 in constant 1990 dollars for three consecutive years.