Garment exports face further trouble with new Pakistani initiative

By

Isabelle Crossley

Published
Nov 20, 2017

As the Pakistani Government announces huge incentives for its garment exporters, rates in India continue to fall which has led experts to fear that the worst is yet to come.

Following the Indian Government’s decision to cut the duty drawback incentive from 7.7 percent to two percent on October 1, garment exports have fallen at a loss of 3,700 crore rupees (approximately 556 million UD dollars). This has caused garment hubs such as Ludhiana’s revenue to nosedive and Pakistan’s move to incentivise their own garment exporters could indeed exacerbate this problem.

“The 41% decline in exports of readymade garments from the country is just the beginning of the worst times and I hope government realises its mistake now or else it will be too late,” said the President of the Knitwear and Apparel Exporters Organisation, Harish Dua. “Our repeated requests to hike the duty drawback rates to a nominal level have gone unheard and nothing has been done till now. This has given a chance to our neighbouring country like Pakistan to take advantage of this situation which is clear from their announcement of series of incentives for their garment exporters which even include huge incentives in the form of duty drawbacks, concession in local taxes,” Dua continued.

Dua opined, “Pakistan’s move will definitely hit India’s garment exporters very hard in global markets as we will not be able to match the rates given by the Pakistani exporters for the same products.” The Indian Government’s “Make in India” campaign aims to promote the production of textiles and products in India itself, especially those using more traditional methods and many believe that new GST rates are harming this directive and are not incentivising production as promised. However, despite meeting recently to review GST rates, the GST Council have not sufficiently addressed the issue in the eyes of garment exporters.