India Faces Stiff Duty Restrictions In Global Cotton Markets

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Confederation of Indian Textile Industry (CITI) in a recently concluded study observed that India is lagging behind in cotton exports to major markets. The situation has been created because of the duty disadvantage India is faced with as against Bangladesh, Vietnam and Pakistan. These countries enjoy duty free access.

A whopping 25% slump in Indian exports has occurred in the past five years to markets in EU and China, the study observed. Citing figures CITI stated that Indian cotton yarn exports fell from USD 4.5 billion in 2013-14 to USD 3.4 billion in 2017-18. Earlier India was the biggest exporter of cotton yarn to China. Now China has replaced India with Vietnam and Indonesia. These countries have duty free access to the Chinese markets whereas Indian yarn comes with 3.5% duty. The study also pointed out that fabric export from India has fallen by 7%.

Cotton yarn coming from India too has a similar disadvantage as it is subject to 4% duty in the EU. In contrast, Vietnam and Indonesia face 3.2% tariff as they enjoy duty free access by virtue of being the least developed countries (LDCs). To combat the unfavourable situation, CITI has recommended higher incentive for cotton yarn and fabrics from the current 2% in the Merchandise Exports from India Scheme (MEIS).

CITI Chairman Sanjay Jain pointed out that as per the organization’s analysis, “India’s raw cotton is going to various markets at zero duty instead of being converted into yarn or fabric.” This should change for the better as it results in loss of employment and foreign exchange. In the recently concluded crop season, India had exported USD 1.9 billion worth cotton.

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