The recently announced sops — marginal increase in DEPB and drawback rates — can hardly reverse the declining trend in textile and garment exports.

Nor would the commerce ministry’s comparatively more useful proposal to neutralise state-level taxes in export content, which the Cabinet is expected to consider shortly.

Indian textile industry’s principal handicap is that its synthetic raw material base (prices) is globally uncompetitive. If this problem is squarely addressed, then the exporters would even withstand rupee’s appreciation to a considerable extent.

Traditionally, manmade fibres have been subjected to very high levels of tax in India. The upstream industry — the domestic producers of these industrial inputs — used to be ‘protected’ by abnormally high Customs duties.

This had undermined the ability of the downstream users of these goods (textile and garment makers) to compete in the global market. Which is why India’s is a predominantly cotton-based (60:40) textile/garment industry, quite the mirror reflection of the world. This ‘skewed fibre mix’ has reduced India’s playing field in the US and the EU, markets which are synthetics-rich.

Recent years’ rapid increase in cotton output — thanks to the cotton technology mission and Bt cotton — has caused a revolution of sorts, further buttressing India’s global competitiveness in cotton-dominant cloth. (82% of Indian exports are now cotton-based).

Last year, India emerged as the second largest producer and exporter of cotton (pipping the US in both cases), with production of 280 lakh bales (of 175 kg each) and exports of 55 lakh bales (lb). The cotton year that has just begun is estimated to be even better with production of 310 lb and export of at least 60 lb.

Mr. Divya Aggarwal

Money Management Consultants Ltd

Senior Copy Editor, Money Management Consultants Ltd
New Delhi, India

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