Cotton yarn and fabric exports drop due to high duties in India
According to Confederation of Indian Textile Industry (CITI) India’s export of cotton yarn to the European Union (EU) and China has declined by 25% in the past five years, while fabric export fell 7%. The Indian cotton yarn exports fell to USD 3.4 billion in 2017-18, from USD 4.5 billion in 2013-14. China has dropped India and started importing yarns from Vietnam and Indonesia, as they have duty-free access while Indian yarn carries a 3.5% import duty. Likewise, there is 4% duty on Indian exports of cotton yarn in the EU, while Vietnam and Indonesia have a 3.2% tariff. The least developed countries (LDCs) get duty-free access; it’s time for the Indian textile industry to look at other markets besides China.
To make India competitive, CITI has suggested higher incentive for fabric from the current 2% in the Merchandise Exports from India Scheme and also to include yarns in it. The Indian spinning mills showed good results in exports during 2013-14, when cotton yarn was covered under schemes such as 2% incremental export incentive, 2% interest subvention and 3% focus market incentive. The withdrawal of these incentives have put the mills in lurch and The industry is forced to sell cotton yarn at lower prices due to a surplus. In case of fabric, Indian exports are levied 8-10% duties, which is 6.4% maximum for other exporting countries.
As per the CITI analysis, India’s raw cotton is going to various markets at zero duty instead of being converted to yarn or fabric, resulting in loss of foreign exchange. India exported USD 1.9 billion of raw cotton in 2017-18. The fall in cotton yarn and fabric exports is impacting the entire value chain — from farmers to spinners, weavers and knitters. “There is considerable exportable surplus but we are not able to be overcome the tariff disadvantage despite being competitive in both spinning and weaving,” states Sanjay Jain, Chairman, CITI.India News Region