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FTA with EU soon, to benefit textile exports

July 11, 2012 11:26 IST

In a move that could improve the weakening sentiment in the Indian textile industry, the government is set to sign a free trade agreement (FTA) with the European Union (EU) by the end of the current calendar year.

Revealing this on the sidelines of the 55th National Garment Fair organised by the Clothing Manufacturers Association of India (CMAI), Kiran Dhingra, secretary, ministry of textiles, said, "We hope the FTA with the EU would be signed by November– December."

The EU accounts for 49 per cent India's annual apparel exports of $13 billion. Hence, it is significant for the domestic textile industry. The economic slowdown in the EU has pulled down India's apparel exports by over 50 per cent to that region in the last few years.

As a consequence, readymade garment manufacturers are now exploring other destinations, such as South America, West Asia and East Asia for compensating at least a part of the decline in the export business.

Asked about details of the FTA, Dhingra said, "The FTA with the EU is different from those signed with other countries. The textile industry will see a major boost once the FTA is signed."

Elaborating, Textile Commissioner A B Joshi said, "India's readymade garments will be priced on a par with competing countries, including Bangladesh and China. Since the quality of Indian garments is on a par with its competitors, we see no reason why exports would not see a warm response."

Indian goods cost 10 to 15 per cent more than Chinese products and 15 to 20 per cent higher than Bangladesh's products.

Apparel exports

have been the worst hit during the ongoing global slowdown. During the first half of the current financial year, these are likely to remain lower than they were in the same period last year. But, the second half is expected to be better, due to the efforts by garment manufacturers on new markets, Dhingra added.

According to Rahul Mehta, president of CMAI, once the FTA is signed, the cost of apparel originating from India would be the same as that from China and Bangladesh. Bangladesh falls under the category of least developed country due to which it benefits from duty-free exports to the EU. China, on the other hand, produces cheaper garments.

"Indian exporters will definitely benefit with the FTA. between India and the EU. Currently, we lose market to China, which will change as soon as the FTA comes into play," said D K Nair, secretary general of the Confederation of Indian Textile Industries.

India's total textile exports in the last financial year stood at $33 billion, of which 49 per cent was exported to the EU. There is an import duty of 9.6 per cent per garment and five per cent on other textile items, which will be abolished as soon as the FTA is signed.

In a similar response as Nair, Premal Udani, chairman of CMAI, said, "The FTA with EU will put Indian exporters on a par in pricing with China, as well as Bangladesh."

The targets set for textile exports year-on-year has not been met for the past several years. After the FTA, however, India would be able to achieve this, as Indian businessmen continue to have entrepreneurial skill for exploring new markets and new means for strengthening the business sentiment and going forward.

Dilip Kumar Jha, Sharleen D''Souza in Mumbai
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