The government is considering raising incentives for exporters to bridge the gap between the selling price of textiles originating from other developing countries and those manufactured in India.

Under preferential treatment, textiles imported from countries such as Bangladesh, Pakistan and Vietnam are preferred to those from India. Apart from that, the lower import duties that domestic exporters enjoy in developed markets such as the United States are no longer available, with the Indian economy achieving the threshold size of $3 trillion. In 2017, India was the sixth largest economy with its gross domestic product (GDP) at $2.59 trillion.

With preferential treatment given to underdeveloped countries such as Bangladesh, Sri Lanka and Pakistan, the total difference in the duty applied works out to nearly nine per cent. After considering rupee depreciation along with incentives offered by the government, such as the recent 2 per cent sop under the Merchandized Export Incentive Scheme (MEIS), this difference narrows down to five per cent.

The United States, however, has dragged India to the World Trade Organisation (WTO), challenging the incentives offered for exports. While the WTO has set up a committee to examine the issue, the labour-intensive textile industry is positive that the government will continue to support it.

“We want this MEIS incentive to be doubled to 4 per cent at least. Given the marketing skill of individual exporters, India would be able to bridge the gap fully to enable exporters to boost their shipment. Without this increased MEIS, the industry would not be able to compete with Bangladesh, Sri Lanka and Pakistan,” said Siddhartha Rajagopal, Executive Director, The Cotton Textile Export Promotion Council (Texprocil).

Speaking at an award distribution ceremony, the Union Textile Minister Smriti Irani said, “Indian industry has been known as the harbinger of change and technology innovation. Prime Minister Narendra Modi has reiterated time and again, that textile is an inclusive industry, one that takes the journey forward from farm to fabric to fashion to foreign. The government's decision to increase the price of fair average quality grade cotton seed in this cotton season by 28 per cent shows its commitment to facilitate the cotton sector from farm onwards to exports.”

Rajagopal said the industry had already submitted challenges faced by it to the government in achieving the desired export goal. “We are hopeful the government will consider the proposal to meet India’s objective to boost exports and achieve the target."

Meanwhile, the minister exhorted Texprocil to reach out to MSME players in the sector, who constitute 35 per cent of the Council's membership, so that they know that banking institutions have been given a mere 59 minutes to give in-principle approval for loans to small traders and organisations.

Expressing satisfaction with the 26 per cent growth of cotton textiles this year, the minister stated that this also sets a benchmark to double growth next year.

Interest subvention on pre-shipment and post-shipment finance for exports by MSMEs has been increased from 3 per cent to 5 per cent. Welcoming the announcement, Ujwal Lahoti, Chairman, Texprocil, said, “These measures will provide much-needed support and encouragement to the MSME sector, which contributes significantly to textiles exports”.

Under the package, GST-registered MSMEs will get 2 per cent interest rebate on incremental loans up to Rs 10 million. A web portal has been launched through which MSMEs can avail of loans up to Rs 10 million.

The MSME sector accounts for about 45 per cent of manufacturing output and 40 per cent of total exports. One of the problems faced by the MSMEs is getting bank finances.

"The announcement has certainly come as a huge relief for the MSME sector, as a majority of the units, being in the informal sector, find it extremely difficult to raise funds for their business activities as credit appraisal is a major challenge,” said Lahoti.