The overvalued rupee is hurting India’s apparel exports. A strong rupee has significantly diluted the impact of the special Rs 6000 crores package for the apparel industry. A depreciation of the rupee in a calibrated manner will help India's exports become competitive in the global market.
Market disabilities for the apparel industry in India include issues related to logistics cost and time, rigid labor regulations, lack of economies of scale and discrimination in export markets arising out of preferential trade agreements for competing countries in major markets such as the US and EU. Policy disabilities include tax and tariff policy which plays a major role in export performance.
While various ways and means are used to neutralize market based disabilities, the duty drawback facility is usually used to neutralize any tax and tariff disabilities. Exporters suggest that for ensuring taxes are not exported a system of Central and State drawback should be envisaged for the post-GST drawback system.
The principle of zero rating of exports is uniformly followed by all countries across the world. However, exporters say zero rating of exports as prescribed in the GST law will not be complete and will be limited to refunding of input taxes as there are a number of GST taxes which are invisible and embedded in the FOB value of exports, given the design of GST. So refund of the blocked GST taxes should not be seen as an incentive but as an enabler of trade neutrality.