India's apparel exports may dip in FY18 over GST,
global challenges
For the month of January more than 55 lakh GST
returns have been filed reported by GSTN Chairman Ajay
Bhushan Pandey.
If the 10-month data from April 2017 to January
2018 is anything to go by, India's apparel industry may
post a rare decline in exports for the current fiscal
2017-18, let alone meeting the $20 billion target.
While India may have reported a 6-20 per cent
growth in apparel exports to different destinations such
as the US, UK, Germany, France and Spain during
November-December 2017, overall exports in the sector
are down by one per cent for the 10-month period of this
year.
Global factors such as free-trade agreements of
competing nations with key markets like Europe, the UK
and the US had already been posting a challenge to
Indian ready-made garments (RMG) exporters. However,
post Goods and Services Tax (GST) implementation in July
2017, reduced export incentives coupled with delay in
input credit refunds have further accentuated the
industry's woes. |
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Data shared by industry body Apparel Export Promotion
Council (AEPC) shows that India’s RMG export to world in
the April-January of 2017-18 was to the tune of
$13,783.4 million. down 1.27 per cent compared to the
same period of previous financial year. During
April-January 2016-17, India’s apparel exports were to
the tune of $13,960.2 million.
According to AEPC and rating agency Icra, the decline
has been primarily driven by the sharp decline in
exports to the UAE market. This has been augmented by
dismal global apparel trade which remained subdued at a
mere one per cent growth in calendar year 2017,
following a decline of two per cent and five per cent in
2016 and 2015, respectively.
As per Icra, particularly for the ten-month period
ending June 2017, India’s apparel exports to UAE had
grown at a sharp pace of 56 per cent year on year (YoY).
"Thereafter, apparel exports to the UAE have fallen at
an equally fast pace, by as much as 45 per cent since
June 2017. Excluding the trade with the UAE, India’s
apparel exports are estimated to have stood 3-4 per cent
higher in 10 months of FY2018," Icra stated.
HKL Magu, chairman of AEPC told Business Standard that
the industry will not be able to reach the target of $20
billion of apparel exports.
"The implementation of GST since July has resulted in blockage of funds for the
export community due to lack of input credit refunds.
Except for a few exporters, hardly anyone has received refunds since last eight
months. Exporters don't have money to pay to suppliers. Secondly, export
incentives such as duty drawback and rebate on state levies (ROSL) have been
reduced," said Magu. While duty drawback rate and rebate of state levies (ROSL)
were lowered to two per cent from 7.5 per cent and 3.9 per cent, respectively in
the post GST era, incentive under merchandise exports from India scheme (MEIS)
was increased from two to four per cent.
However, with the MEIS deadline expiring on June 30, 2018, the industry is
uncertain of taking orders beyond the date on the basis of a higher incentive.
"If they don't renew it then we will be unable to book orders beyond June
because we are unsure if MEIS will continue after that. We will lose money if we
assume four per cent incentive beyond June and the government does not extend
it," said Magu.
Already, global factors have been rendering Indian RMG exporters uncompetitive.
"While China has vacated the apparel export space, India is unable to encash on
the opportunity unlike Vietnam, Bangladesh or Cambodia who have free trade
agreements. India is emerging as an expensive affair in the global apparel
market," Magu stated.
Supported by its duty-free access to the EU market, Bangladesh retains its
status as the second-largest apparel exporter after China. Vietnam remains the
fastest growing amongst large apparel exporting nations, maintaining its growth
in the US market despite the latter backing out of a proposed trade agreement.
Further, Jayanta Roy, Senior Vice-President and Group Head, Icra is of the view
that the competitiveness of the Indian apparel exporters will also remain
contingent upon the movement in foreign exchange rates.
"This remained a key challenge last year, with the Indian rupee appreciating by
three per cent (vis-à-vis US$) in calendar year 2017 compared to 1-3 per cent
depreciation in currencies of other key apparel exporting nations (i.e China,
Bangladesh and Vietnam)," said Roy.
Source::: Business Standard,
dated 06/03/2018
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