Budget 2021

Budget 2020: Decision to review ‘rules of origin’ clause likely to check rising textile imports from Bangladesh

Pratim Ranjan Bose Guwahati | Updated on February 03, 2020

The Union Budget decision to review ‘rules of origin’ of the clause under the Customs Act to check misuse of FTA route and strengthening provisions relating to safeguard duty; may check rising flow of textile (readymade garments) imports from Bangladesh.

India offers Bangladesh duty-free, quota-free import advantage under SAARC FTA or SAFTA, entered in 2011.

Textiles played a crucial role in pushing Bangladeshi exports to India from $672 million in 2016-17 to $1.04 billion during April-November period of 2018-19. During April-November this fiscal, total imports from Bangladesh stood at $781 million (annualized $1.17 billion)

Bangladesh is world’s second-largest exporter of readymade garments (RMG). However, its exports to India got a significant boost following the implementation of GST – which subsumed 12 per cent countervailing duty (CVD) - in July 2017.

Countries like Sri Lanka, Vietnam also enjoyed the benefits of the introduction of GST. But, Bangladesh made the most of it.

During the first eight months of 2019-20, India imported $801 million worth of textile items under HS codes 61 and 62. Of India’s total garments import one-third (34 per cent) came from Bangladesh. The share is as high as 44 per cent in imports under HS-Code 62 (articles of apparel and clothing not knitted or crocheted).

What particularly drew the attention of the Indian textile industry was the absence of the minimum value addition criteria in SAFTA. Confederation of Indian Textile Industry (CITI) was apprehensive that the loophole might be used for diversion of Chinese man-made fibre-based garments through Bangladesh.

With India-Pakistan relations at its lowest ebb, amending SAFTA may not be possible at this juncture, Sanjay Jain Managing Director of TT Ltd felt India might consider imposing safeguard duty as per Budget provisions.

Published on February 03, 2020

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