The country’s cotton yarn and fabric exports are struggling because of the duty disadvantage faced by the Indian exporters in major markets, found a recent study by the Confederation of Indian Textile Industry (CITI).
There has been continuous decline in exports of cotton yarn and fabric during 2013-14 to 2017-18. India’s exports of cotton yarn declined by 25 per cent from US $ 4,570 million in 2013-14 to US $ 3,443 million in 2017-18. In the same period, fabric exports declined by 7 per cent from US $ 4,941 million to US $ 4,598 million.
Sanjay Kumar Jain, Chairman, CITI pointed out that the Indian spinning mills performed well in exports during 2013-14, when the cotton yarn was covered under schemes such as 2 per cent incremental export incentive, 2 per cent interest subvention and 3 per cent focus market incentive and the sector could penetrate into alternate markets other than China. However, suddenly all incentives were withdrawn leading the spinning mills high and dry.
He highlighted that China, which is the largest importer of cotton yarn, has shifted from India to Vietnam and Indonesia, as they have duty-free access, while the Indian yarn carries 3.5 per cent import duty. From 2013 to 2017, there has been a decline in India’s cotton yarn exports to China by 48 per cent, while exports from Vietnam and Indonesia has increased at a remarkable rate of 129 per cent and 55 per cent, respectively, in the same period.
India’s raw cotton is going to various markets at zero duty. India exported US $ 1,894 million worth raw cotton in 2017-18. Exporting of raw cotton bales instead of value addition by converting to yarn and fabric is leading to loss of valuable foreign exchange, employment and better remuneration to farmers.
Similarly, fabric exports from India are at serious disadvantage vis-à-vis exports from competing countries due to duty differentials in leading exports markets. Markets like EU, China, Turkey and Vietnam impose an import duty in the range of 8-12 per cent on Indian fabric, while duty-free access is given to countries such as Pakistan, Cambodia, Bangladesh and Cambodia.
He said that falling of Indian cotton yarn and fabric exports is impacting the whole value chain from farmers, spinners to weavers/knitters as there is considerable exportable surplus in country, but we are not able to be overcome the tariff disadvantage despite being competitive in both spinning and weaving.
As per the Financial Stability Report by RBI, the stressed advanced ratio of the textiles sector stood at 18.7 in September 2018. Further, the growth in clothing has not been supportive to consume the extra capacity leading to pressure on the yarn and fabric capacities. The exports of garments have declined from US $ 17.4 billion in 2016-17 to US $ 16.7 billion in 2017-18.