By Chandrima Chatterjee
India is looking at $100 billion worth of textile exports by 2030. Ahead of Budget 2025, Chandrima Chatterjee suggests tweaks in the quality control orders for textile products and tackling non-tariff barriers faced by exporters to leverage free trade agreements to the maximum
Current status of the textile and apparel sector
The Indian textile and apparel (T&A) industry has performed well in the current fiscal, with exports up by 6.93% during April-November 2024 compared to the same period in 2023. This growth is primarily driven by the apparel segment, which saw an 11.3% rise in exports. The surge is attributed to rising demand for Indian T&A products in major markets like the
USA and the EU. The industry is optimistic about sustaining this momentum through the rest of the fiscal. India is a significant player in the global textile and apparel market, ranking as the world’s sixth largest exporter in 2023. The sector accounted for around 8% of India’s total exports in 2023-24.
However, uncertainties on the continuation of some critical schemes such as the Remission of Duties and Taxes on Exported Products (RoDTEP) for advance authorisation (AA)/ special economic zones (SEZ) and export-oriented units (EOU), as well as the Interest Equalisation Scheme beyond December 31, 2024, pose a potential challenge to the growth of the industry.
Quality control orders announced for textile products
Quality Control Orders (QCOs) are regulatory directives issued by the government to ensure that specific products meet mandatory quality and safety standards. Unlike voluntary Bureau of Indian Standards (BIS) norms, QCOs are compulsory, requiring manufacturers, importers and sellers to comply with the prescribed norms.
The intent behind introducing QCOs in textiles for certain man-made (MMF) fibres, filaments and yarns is enhancement of product quality. However, the industry’s primary concern lies in the implementation approach. Globally, such mandatory quality standards are usually applied top-down, beginning with finished goods.
Whereas in India, the focus of quality standards is on raw materials such as fibres and yarns.
Are QCOs posing any challenges?
The present approach has limited the supply of certain raw materials as many overseas suppliers are yet to receive BIS certification. Though exemptions for imports by AA, SEZ and EOU units are allowed, these provisions apply only to physical exports, not intermediate supplies. The manufacturers of certain specialised downstream products who are dependent on imports of such raw materials due to non-availability domestically in terms of required quality and quantity have taken a hit. This might lead to a flood of imports of the next product in the value chain, such as fabric and garments, which will affect the interest of the domestic manufacturers.
As such, there is a dire need to re-evaluate the policy regarding the QCOs and an impact assessment needs to be done before announcing any further QCOs. To meet the objective of having quality finished goods, QCOs may be started from the garments.
Fibre prices, sops for investment
Indian fiber prices, including that of cotton and MMF, are 12% to 30% higher than those available to competitors. That percolates down the value chain, resulting in the erosion of the cost-competitiveness of the garments and made-ups. The government needs to ensure raw material availability at internationally competitive prices by removing import duty from all cotton varieties as also liberalising the import policy for MMF fibres.
Following the discontinuation of the Technology Upgradation Fund Scheme (TUFS), there is a lack of investment incentives for MSME units, which constitute the majority of the industry. MSMEs require TUFS-like schemes with upfront capital subsidies and simplified procedures to ensure capacity building, particularly in downstream segments, to attract more investments .
Leveraging free trade agreements
For the textile and apparel sector, Free Trade Agreements (FTAs) provide tariff concessions, better market access, and a level-playing field against global competitors. Recently India has signed trade agreements with important T&A markets such as the UAE, Australia and Mauritius and has also signed a pact with the European Free Trade Association (EFTA). The industry is particularly keen on finalising the FTA with the EU, the second-largest export destination for Indian T&A products.
To maximise the benefits of FTAs, the government may also negotiate on the various non-tariff/technical barriers that Indian exporters might be facing while exporting to these countries. For instance, the EU and the UK are coming up with stringent quality measures; at the same time, the Indian government through the BIS is also coming with standards that are at par with international norms. Both sides may negotiate for mutual recognition of testing and quality norms which will further catalyse bilateral trade.
The writer is secretary-general of the Confederation of Indian Textile Industry.
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