If India chooses not to enter into free trade agreements, it can give an edge to its competitors. By choosing to enter, India can kill the chances of its domestic industry.

The concessional tariff offered to polyester yarn under India’s free trade agreement with Indonesia and Vietnam combined with the post-GST tariff rationalisation is harming the growth prospects of a section of domestic textile mills that deal with this manmade fiber. Polyester yarn imports are subject to zero duty while polyester staple fiber carries an import duty of five per cent. This makes yarn imports more attractive than import of yarn fiber for local production of polyester yarn. There has been an 855 per cent increase in the quantity of polyester yarn imports to India over the last 26 months.

On the other hand, India’s apparel exports have been facing challenges for the last two years due to other countries FTAs. India’s position in the EU market for instance has been adversely affected by the preferred access competing nations such as Bangladesh and Vietnam has by way of FTAs. These could make it increasingly difficult for India’s apparel exporters to maintain their competitiveness in its largest market, the EU, which accounts for about 35 per cent of India’s apparel exports.