India is the world's second largest producer of man-made fibers. These constitute almost two-thirds of the domestic textile market. However, India’s share in the global exports of man-made fibers is just about three per cent. A major anomaly in the excise duty structure is affecting the growth of Indian textile industry and preventing it from achieving a larger share of the global market.

In contrast, China has given a big push to synthetic textiles and this has helped it become the world's largest textile exporter. Almost 80 per cent of China's textile exports consist of synthetics. The excise duty imposed on man-made fiber and yarn in India is 12 per cent while cotton yarn and fiber are exempt from excise duty.

In the domestic market, poor consumers suffer as the least expensive polyester shirt or sari made of synthetic fiber costs Rs 100 or Rs 150 because of the excise duty. In contrast, no excise duty is paid on cotton fiber and yarn used to produce cotton shirts bought by consumers at prices ranging above Rs 1,000. Therefore, only the poor pay more tax on textiles in the domestic market while the better-off are favored with no excise duty on the premium cotton worn by them.