Three years after key regulatory and labor changes were put in place, India’s textile and apparel exports have declined from 2014 to 2018 while imports have increased. Particularly hit has been the apparel sector, where the time taken by the industry to adjust to the Goods and Services Tax regime, downward revision of export incentives, and a credit squeeze faced by small and medium scale enterprises have pushed production downwards. India’s apparel exports fell by 1.2 per cent in fiscal year ’19 from fiscal ’18, which in turn was four per cent lower than the previous year. Even the share of apparel exports in the country’s total textile exports fell from 51 per cent in fiscal ’17 to 45 per cent in fiscal ’19. The fall is attributed to the ever tightening pressure on export markets by higher shipments from low-cost competitors like Bangladesh and Vietnam.

The recent slowdown in global demand has also increased competition in the markets which has coincided with taxation changes in India. Barring a few months, apparel exports have been continuously declining since October 2017, mainly due to stiff competition, slowdown and discontinuation of certain export incentives. There was a six per cent to seven per cent impact on costs, which hurt profitability of garment makers.