Indian Garment Makers Fear Exports Will Drop 15% to $14 Billion This Fiscal

Garment manufacturers are apprehensive of an over 15 per cent drop in exports in 2017-18 to $14 billion, from $17 billion a year ago, because of a reduction in duty drawback reimbursement rate and rebate on State levies (ROSL) following the implementation of the Goods and Services Tax (GST).

“So many garment manufacturing units are shutting down all over the country, be it in Noida, Okhla, Jaipur or Ludhiana. Exporters are losing orders because of their loss in competitiveness. If the government doesn’t step in to restore the earlier input reimbursement rates, there will not only be a sharp drop in exports, but millions of jobs will also be lost,” said PMS Uppal, President, Okhla Garment and Textile Cluster. Industry representatives point out that the total reimbursement under duty drawback and ROSL has been brought down to 7 per cent from 14 per cent, eroding all profit margins.

“We feel let down by the meagre rates of duty drawback and ROSL. The government has assumed that this is being made up by GST refunds but this is not the case as there are a lot of embedded taxes that are not being reimbursed,” said Sudhir Sekhri, Chairman, Garments Exporters Association.

While exporters are relieved about the recent decision of the government to increase the rates of incentives under the Merchandise Export from India Scheme for garments and made-ups to 4 per cent from 2 per cent, they say it is not enough to compensate for their losses.

“Our competitiveness has been affected to the extent of 6-7 per cent on account of the reduction in the drawback and ROSL rates. We were earlier working on a profit margin of 4-5 per cent. We have now reached a situation that exporters are losing their orders to producers in Vietnam and Bangladesh because of uncompetitive prices,” Uppal said.

The garments industry, which employs over 12 million people, may have to retrench half the workforce by the end of the financial year if the government doesn’t redress the situation, exporters said.

India’s apparel exports declined 39 per cent in October with an overall decline of 5.94 per cent in the April-October period.