Textile industry seeks sourcing curbs to check rising apparel imports

Increasing apparel imports — particularly from Bangladesh — is slowly and silently killing the entire domestic textile value chain from fibre to apparel, according to the textile industry. The industry has sought immediate government intervention to impose sourcing restrictions in order to cut the damage.

“This no doubt would be a timely and temporary intervention. We need to come up with a permanent solution,” said Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation (ITF).

ITF representatives met Suresh Prabhu, Union Minister for Commerce and Industry, in Delhi to highlight the plight of the textile industry.

He later told BusinessLine that apparel imports into India had risen from $10.94 million in 2009 to cross $100 million-mark in 2015 before soaring to $136.43 million in FY2016.

India allowed duty-free import of readymade garments from Bangladesh under SAFTA in 2006. This facility was initially limited to 8 million pieces. But in 2010, this quantitative restriction was lifted. The Made-in-Bangladesh garments import surged. From a Compounded Annual Growth Rate (CAGR) of 67 per cent between 2006 and 2010, it rose to 98 per cent between 2011 and 2014.

There was a marginal drop in imports in FY2017 because of the overall slowdown, but they resumed pace in FY18 and are proving to be a killer.

Bangladesh does not produce enough fabrics domestically. The duty-free, quota-free facility extended to Bangladesh (in view of it being considered a Least Developed Country (LDC)) benefits China’s export of textiles.

Bangladesh imports fabrics from China, converts them into garments and exports the stuff to India. Since import of Made in China fabrics is meant for export, Bangladesh does not impose any import duty on the fabric import and this facilitates backdoor entry of Chinese textiles into India.

India has not imposed any sourcing restrictions. To make matters worse, the duty-free quota facility has now been extended to all 49 LDCs on a non-reciprocal basis and without any sourcing restrictions.

This could cause more harm to the domestic textile manufacturing sector as some of the LDCs such as Ethiopia, Cambodia and Myanmar, which have duty-free access to the EU, Japan and US markets might dump garments here.

ITF also refuted the charge that India’s textile exports (of denim in particular) to Bangladesh is on the rise. “It is not correct as most of the textile exports from India is routed through Bangladesh because of the cheap labour available there for conversion into apparel,” he said.

Tweaking SAFTA rules

On the way forward, ITF suggests tweaking SAFTA (South Asian Free Trade Area) rules of origin to make use of yarn and fabric of Indian origin mandatory for allowing duty-free quota-free market access.

“This would boost our export of yarn and fabric to Bangladesh and other LDCs,” Dhamodharan said, adding “we will not be the first to impose sourcing restrictions as the US has imposed it under NAFTA (North American Free Trade Agreement) for duty-free import of garments from Mexico and other NAFTA members.”

“We have accepted sourcing restrictions imposed by Japan. This has hurt our apparel exports to Japan under India-Japan CEPA (Comprehensive Economic Partnership Agreement). The Government can do something similar to help the domestic industry without really denying duty free market access to Bangladesh and other LDCs.”

The federation has appealed for a fibre neutral policy.

ITF has, in the meanwhile, decided to engage an expert to prepare a report on the textile industry's competitiveness, FTAs and growth prospects. “This would be ready in the next 8 weeks. We plan to submit this report to the government,” the ITF Convenor said.

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