Indian apparel exports to the European Union will get 20 per cent cheaper in a phased manner with the signing of India-EU free trade agreement (FTA), now in the final stages of negotiations. According to a commerce ministry official, India has managed to convince the EU on bringing down tariffs on Indian apparels from 20 per cent to nil over the next 10 years.
“The move will help India to be price competitive against its competing neighboring countries like Bangladesh and Sri Lanka which are exporting garments to EU at zero duty under the Least Developed Countries (LDCs) status,” the official said.
However, the lower duty benefits to Indian exporters will take at least a year to kick in as the 27-nation European Union Parliament needs to ratify the deal after completion of the negotiations.
India, with apparel export of 4.6 billion euro to EU in 2010, is the fourth largest exporter of readymade garments to Europe, behind China (30.1 billion euro), Turkey (7.8 billion euro) and Bangladesh (5.7 billion euro) but ahead of Tunisia (2.3 billion euro).
“Once the FTA is in place, we hope to see 30 per cent jump in exports of ready-made garments from India as India will have an edge over countries that have either most favored nation status or have an FTA with EU but with apparels in the negative list,” Ajay Sahai, director general of the Federation of Indian Exports Organization said.
India’s garment export in 2010-11 stood at $ 11 billion and textile ministry has set a target of $ 14 billion in 2011-12.
“Indian apparels will henceforth become cheaper as a result of which there will be more orders pouring into India from EU as the import duty gets off on apparels. However, not all products will initially be part of the list of items that will be exempted from import duty,” AK Jain, general manager (commercial), Orient Craft said.
The company export apparels worth Rs 200 crore to EU out of its total annual export of Rs 900 crore.
“Today, EU nations prefer India only for fashionable items across all categories while the basic purchase of bulk apparels happen from China and Bangladesh. With this FTA, India will emerge as a preferred destination for even bulk purchase of daily wear apparels,” HKL Magu, managing director of Jyoti Apparels added.
Bulk of India’s apparel exports happen to UK, France and Germany and the major items include skirts, blouses, scarves and dresses made of cotton and man-made fibre.
Yogima Seth Sharma, Jul 24 2011 , New Delhi
Financial Chronicle