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Anil Sasi

Even though certain value addition norms and safeguards have been incorporated in the India-Nepal Trade Treaty to prevent inflow of third-country products into India, the Government has been finding it difficult to enforce them.

New Delhi , Jan. 16

WHILE the rest of the world has been facing a deluge of Chinese garments since the phasing out of the global textile trade quotas, the Indian market has seen Nepal emerge as the largest readymade garment exporter, even ahead of China.

That Nepal only has a fledgling and extremely uncompetitive domestic textile industry of its own with only a handful of registered exporters, is lending credence to apprehensions of Chinese garments being smuggled into the country through Nepal to take advantage of duty free access under the India-Nepal Trade Treaty.

According to the latest Directorate General of Commercial Intelligence and Statistics (DGCI&S) data, Nepal was the top exporter of garments to India during the first five months of the current fiscal, accounting for 18.52 per cent of the `ready-made garments' (including both woven and knit) imports into India between April and August 2005.

Nepal's share during the five-month period was, curiously, higher than China's market share of 17.53 per cent.

Difficult to impose safeguards: Under the India-Nepal Trade Treaty, in effect till March 2007, India provides, on a non-reciprocal basis, duty free access to the Indian market for all Nepalese-manufactured articles, barring a short negative list. Even though certain value addition norms and safeguards have been incorporated in the Treaty to prevent inflow of third-country products into India, the Government has been finding it difficult to enforce them, official sources said. Also, imports from Nepal under the Treaty are being facilitated through a rather simple procedure of Certificate of Origin issued by Federation of Nepalese Chambers of Commerce and Industry and other affiliated Chambers, making re-export of Chinese products into India through Nepal rather easy, sources said.

The domestic industry has already petitioned the Government on the possibility of Chinese exporters using the Nepal route to gain duty free access into the Indian market.

"The Nepalese garment makers are uncompetitive and the industry there has gone into a death spiral since the quotas were removed. Of 1,067 registered textile and apparel companies operating in Nepal in 1995, only around 25 remain in business now.

"It is very unlikely that the Nepalese exporters can manage to beat China to enter the Indian market. There are clear indications of the preferential access provisions being misused and in all probability Chinese products are finding their way into the Indian market," an industry player said.

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