With apparel from Bangladesh made from fabric sourced out of China flooding the Indian market, the textile industry wants the commerce ministry to fine tune South Asia Free Trade Area (SAFTAs) rules of origin to make it mandatory for Bangladesh to use yarn and fabric produced in India in its garments to claim duty and quota-free exports. Even as textile exports from India continue to drop, there has been a surge in imports of textile products, post GST.
Data released by the Export Promotion Bureau of Bangladesh says India’s imports of garments from Bangladesh rose by 66 per cent year-on-year (y-o-y) to $111.3 million during July-December 2017, while knitted apparel imports from Bangladesh spiralled upward by 77 per cent y-o-y to $36.5 million between July and December 2017, woven apparel imports went up by 62 per cent y-o-y to $74.8 million.
Prabhu Dhamodharan, convenor, Indian Texpreneurs’ Federation (ITF) asserts, Tweaking SAFTA rules of origin to make the use of yarn and fabrics of Indian origin mandatory for allowing duty-free, quota-free market access will prevent China from taking undue advantage of a facility that is meant for poor, least developed countries (LDCs). At the same time, it will give a boost to India’s export of yarn and fabrics to Bangladesh and other LDCs, which at present are being supplied by China. India will not be the first country to impose such sourcing restrictions for allowing duty-free import of apparel. The US has imposed sourcing restriction under North American Free Trade Agreement (NAFTA) for accepting duty-free import of garments from Mexico and other NAFTA members. India permitted duty free import of readymade garments from Bangladesh under SAFTA in 2006. Earlier, this facility was limited to 8 million pieces per annum. This restriction was removed in 2010 which correspondingly resulted in imports from Bangladesh rising consistently.
Bangladesh imports Chinese fabric, converts them into garments using its cheap labour and exports them to India without paying any duties.Thus, this unilateral duty free market access given to Bangladesh is actually facilitating backdoor entry of Chinese textiles into India.