Multi-stage and different tax slabs are affecting the Indian manmade fiber sector. In the international market Indian manmade sector is expensive by five to eight per cent compared to East Asian countries, mainly because of multi-level taxes that are not fully rebated and high interest rates.
The sector saw almost nine per cent per annum growth in the domestic market but exports have stagnated for the last couple of years. Accumulated credit under GST from raw materials and capital goods investments are affecting the industry and blocking investments. Though the actual production cost for the manmade fiber sector is lower compared to China, India is not competitive because of taxes.
India can capture the space vacated by China in the international textile market by focusing on manmade fibers. Synthetic textiles made from manmade fiber account for 70 per cent of the world textile supply. Contrary to the global trend, cotton still commands more than 50 per cent of India’s textile production.
India is already reeling under a huge competitive disadvantage in the international textile market when it comes to manmade fiber based textile products. Competitors like China, Vietnam and Bangladesh are ahead in global exports of manmade fibers.