To help textile industry touch its potential of US $500 billion by 2025 from the current level of US $110 billion, industry body ASSOCHAM has advocated signing of Free Trade Agreement (FTAs) with European Union countries (EU) and entering agreement with the US before our industry become uncompetitive Trans-Pacific Partnership (TPP).
In a note submitted to the government, the chamber has stated that the estimated US$ 500 billion potential consists of domestic sales of US$ 315 billion and exports of US$ 185 billion. To achieve this huge target, great planning and action are required on the part of both the industry and the government. This looks ambitious but is not impossible as China by introducing various pro-industry policies has done the progress in the same in the last 10-15 years.
The chamber secretary general, DS Rawat says, the domestic market has to grow at 16-17% from the present US$ 68 billion to around US 315 billion. Currently, the total textile exports from India are US$ 40 billion. Out of this, cotton exports are about US$ 21.50 billion, MMFs are about US$10.0 billion and other textiles like Silk, Handloom, Jute are about US$ 8.50 billion.
Assuming cotton exports to grow about 10% at CAGR, the total cotton exports by 2025 would be around US$ 55 billion and other textiles would be of around US$ 14 billion, thereby leaving a target of US$ 116 dollar which MMF/ Filament Yarn only can achieve. Exports of MMF / Filament Yarn are currently US$ 10 billion and in order for MMF / Filament Yarn to reach the target level of US$ 116 by 2025, this segment will have to grow at more than 25% CAGR, adds the ASSOCHAM.
However for the last 10 years, we have been regularly failing to achieve our export targets again and again because our concentration remains high on cotton. The MMF / Filament Yarn industry, which could have given much desired growth, has not been given its due attention. Now, the time has come that we give due focus on the MMF to attain our exports and desired growth for the Textile Sector, said Rawat.
Since we have not been able to complete the Doha Round of trade talks, our Textile Industry is to face at duty of 15%-30% in the developed markets of US and E.U. against the Least Developed (LD) countries like Bangladesh, Vietnam, Cambodia, Myanmar who are at zero duty. If Doha Round would have been completed our duty also would have been come down to single digit.
The Trans-Pacific Partnership (TPP) between US, Japan, Canada, Chile, Vietnam, Malaysia, Singapore, Australia, Brunei, Mexico, New Zealand and Peru, which has been signed last week will cause trade diversions effects in some of the key sectors such as textiles and clothing industries for India.
The United States accounts for 20-35% of India’s ready-made garment exports and the TPP is going affect India’s textile sector in two ways: First, TPP member countries will get preferential access in the US markets as against Indian’s exporters. This would disadvantage India as US import duties on ready-made garments are high.
Secondly, the ‘Yarn Forward Rule’ – a key feature of TPP – makes it mandatory to source yarn, fabric and other inputs from any or a combination of TPP partner countries to avail duty preference. This would change the dynamics of the existing global supply chain in textile and clothing sector.
At present, India exports yarn and fabric to Vietnam, which then makes the textiles and exports to countries like the US. Now, because of yarn forward rule, they will be under pressure to develop local production. While Vietnam will have zero-duty access to the US market for textiles, Indian players will have to pay higher duties, which will make India’s which will make India’s textiles exports uncompetitive.