The withdrawal of the Merchandise Exports from India Scheme (MEIS) will hit the knitwear and garment industry badly. The scheme provides four per cent incentive to garment exporters. Its absence would mean an increase in prices of products. This will put exporters in a disadvantageous position in the highly competitive international garment market that is now flooded with cheaper apparels from countries like Vietnam, Sri Lanka and Bangladesh. Withdrawal of the incentive scheme would push up the prices of products which have been decided much in advance. Usually, advance orders are taken and a price is agreed on. If the incentive is withdrawn, and a price rise takes place abruptly, customers are under no obligation to buy since there are cheaper products available on the market.

India does not have free market access to the EU and the US – major buyers of garments – and this is a major problem being faced by Indian manufacturers since an entry tax is levied once goods reach the destination countries. After GST was levied in July 2017, exporters were left with just the four per cent MEIS as all other incentives in the form of duty drawback, rebate on state levies, and concession on service tax were withdrawn.