India’s garment export growth slowed down to 5.1% year-on-year in May from 9.2% in the previous month, thanks to a withdrawal of certain incentives by the government and a fragile recovery in key markets such as Europe, the latest AEPC data showed.
Apparel Exports Promotion Council (AEPC) chairman Virender Uppal said on Monday the country’s apparel exports hit $1.57 billion in May, against $1.49 billion a year earlier. In the first two months of this fiscal, the exports touched $3.01billion, up 7% from a year earlier but lower than a 12.2% growth in the entire 2014-15 fiscal.
However, the growth rate is still better than 17.2% drop in the country’s overall exports during the April-May period from a year before.
“As some of the export incentives for exports have been withdrawn in the foreign trade policy (2015-2019), it has had a dampening effect on the overall trade. Apparel exporters work on very thin margin and, therefore, the incentives are of a big help. In the FTP 2015-19 announcements, garment export sector got 2% reward only on 239 HS lines out of 398 lines earlier,” Uppal said.
Among other things, AEPC had recommended a 5% duty credit scrip for major markets, including the US and the EU, and a flat rate of 2% for other nations.
“No Merchandise Exports from India Scheme (MEIS) has been announced to Latin America, West Asia, CIS, Africa and Oceania countries. The non-traditional markets, which constitute around 35% share in India’s garment exports, are poised to receive a setback due to withdrawal of the benefits of the Chapter 3 benefits,” Uppal said.
The EU market constitutes 41% of the India’s RMG exports. Conditions in major markets like EU, continues to be far from satisfactory. India is also facing a duty disadvantage of 9.6%, compared with competing countries like Bangladesh and Pakistan which are having zero duty access to that market.
Similarly, the US constitutes 21.7% of India’s RMG exports and the market condition in that country is yet to rebound sharply. “The prospects of considerable improvement in the market are rather limited due to competition from countries like Vietnam, Mexico which have zero duty access under preferential treaties with the US,” Uppal said.
The AEPC chairman has demanded a 3% interest subvention retrospectively, from the beginning of the last fiscal, to partially mitigate high cost of lending, which is hovering around 11-12%, compared with 4-6% in competing countries. He has also sought support from the FTP — a 5% duty credit scrip to major markets.
AEPC has said the government should ensure swift clearances of import and export by customs.
The government should also finalise on an urgent basis the India-EU FTA and the CEPA with Canada so as to “mitigate the duty disadvantage suffered by India vis-a-vis our competitors like Bangladesh, Cambodia, Vietnam, Pakistan, etc in the major markets,” Uppal said.