Garment manufacturers benefitting from export incentive schemes of the government need to watch out. The US has demanded that all export subsidies, including the popular interest subvention scheme provided to the sector, be withdrawn as the phase out period for the incentives allowed by the World Trade Organisation (WTO) was over last year.
New Delhi, however, has challenged the claim and has said that as per its calculations, it has two more years to remove the subsidies.
“The US, in a recent meeting on subsidies at the WTO, argued that the WTO Secretariat released calculations seven years ago showing that India had reached export competitiveness in textile and clothing no later than 2007. It had eight years to phase out its subsidies and the period is already over,” an official at the WTO told BusinessLine .
It further said that the US was concerned about reports from India suggesting New Delhi was considering new export subsidies for its textile and apparel industry and was planning to prolong the phase-out of existing export subsidies for the sector.
“We have not broken any of our commitments. India has already eliminated a number of export subsidy programs in the textile and apparel sector, and others are being removed or rationalised,” a Commerce Ministry official said.
While the US cannot do much in terms of forcing India to remove its subsidies to garments producers immediately, as the dispute resolution mechanism is time consuming, such interventions can keep the pressure high on India to withdraw all support to exporters by 2018.
For instance, the interest subvention scheme for exporters (which also includes garments) is for five years, till 2019-20, but the US has already started creating a noise about it.
Raises concern At the meeting, the US said that it was highly concerned about recent press reports which indicated the Indian government had extended yet another program providing preferential interest rates for exporter and increased the preferential rates for the next five years.
“The interest subvention scheme has been provided to exporters to partly compensate them for the high cost of credit in the country compared to competing countries. It does not distort trade,” a Commerce Ministry official said. India’s representative at the meeting pointed out that since the country provided its own information of export competitiveness in 2010, it considered the elimination of the export subsidies would start from 2018.
The representative added that India was committed to meeting its Subsidies and Countervailing Measures Agreement obligations but it was still waiting for a clarification of obligations under the Agreement, particularly in regards to product coverage and tariff lines.
India’s garments exports were to the tune ₹1.11 lakh crore in 2015-16, which was 1 per cent higher than the previous year, according to industry estimates. The sector provides employment to over 45 million people directly and 60 million people indirectly.