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In a development that might prove to be disastrous for the knitwear, garment and textile industry of Ludhiana, which alone has a turnover of Rs 15,000 crore per year and accounts for 95% of total hosiery production in India, the Union government’s move to cut down the duty drawback incentive on export of readymade garments from 7.7% to 2% from October 1 seems to have backfired. 

In one of the worst downfalls registered this year, the exports from the country have fallen by more than Rs 3,712.67 crore in the month of October as compared to corresponding period last year. 

According to city exporters, this massive decline is just the beginning and the worst is yet to come as Pakistan has announced a large number of incentives for its garment and textile exporters under its prime minister’s package of incentives. 

Exporters are very worried as they are of the view that this move by Pakistan will hit them very hard in the global market as they will be unable to compete with the exporters of Pakistan due to cut in their incentives. 

Harish Dua, president of Knitwear and Apparel Exporters Organisation, said, “The 41% decline in exports of readymade garments from the country is just the beginning of the worst times and I hope government realizes its mistake now or else it will be too late.” 

“Our repeated requests to hike the duty drawback rates to a nominal level have gone unheard and nothing has been done till now. This has given a chance to our neighbouring country like Pakistan to take advantage of this situation which is clear from their announcement of series of incentives for their garment exporters which even include huge incentives in the form of duty drawbacks, concession in local taxes,” Dua added. 

“Pakistan’s move will definitely hit India’s garment exporters very hard in global markets as we will not be able to match the rates given by the Pakistani exporters for the same products,” he further said. 

Narinder Chugh, EC member of Apparel Export Promotion Council, “We are facing a very tough time at the moment as garment exports have tumbled since duty drawback on garments export was slashed to 2% by Union government on October 1. The latest data is evidence of its real impact and if government does not takes a call now, garment exports from India are bound to decline further. 

Ever since the duty drawback on export of garments was slashed by 6% our exports have nosedived and several of orders have not matured as we were forced to hike the rates of our products. This is a huge cut and therefore time and time again we had been requesting the union government to revise its orders and fix the rate at 5% 

Harish Dua | President, Knitwear and Apparel Exporters Organisation 

This is like an emergency situation for the garment exporters as the duty drawback has almost been totally finished by our government while our neighbours are enjoying hosts of benefits from their governments which makes us uncompetitive at the international level. Until the union government tries to match the incentives given by the neighbouring countries like China, Pakistan and Bangladesh to their exporters, the situation is not going to improve 

Harish Kairpal, Finance secretary, Knitwear Club 

Key points 

Garment exports fall by over Rs 3700 crore following the cut in duty drawback 

Pakistan set to spoil the game further for the garment exporters 

The knitwear, garment and textile industry of Ludhiana alone has a turnover of Rs 15,000 crore per year and accounts for 95% of total hosiery production in India 

Readymade garment exports already on the fall 

Barring April, May and September, India’s readymade garment (RMG) exports in financial year (FY) 2017-18 have already registered a significant drop during last few months. October 2017 has been the worst month for the exports when more than 40.75% decline was registered. 

Figures say it all 

India’s readymade garment exports to the world 

Month FY 2016-17 FY2017-18 Growth 

April Rs 8,817.19 Cr Rs 11,272.2 Cr 27.8% 

May Rs 9,940.1 Cr Rs 10,342.6 Cr 4.0% 

June Rs 10,565.1 Cr Rs 9,979.6 Cr -5.5% 

June Rs 10,656.13 Cr Rs 9,979.59 Cr -5.54% 

July Rs 9,775.38 Cr Rs 9,262.94 Cr -15.47% 

August Rs 8,904.32 Cr Rs 8,556.35 Cr -3.91% 

September Rs 8,570.76 Cr Rs 10,707.86 Cr 24.93% 

October Rs 9,110.75 Cr Rs 5,398.08 Cr -40.75% 

* Source Directorate General of Commercial Intelligence and Statistics (DGCI&S), Kolkata.

Source  : The Economic Times

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