We Must Import Apparels From Countries Who Source Yarns And Fibres From India: Sanjay Jain

Trade & Policy

We Must Import Apparels From Countries Who Source Yarns And Fibres From India: Sanjay Jain

Indian government seeks to tweak the South Asian Free Trade Agreement to ensure that apparels exported to India from Least Developed Countries in the region have their yarns and fibres sourced from India. This is to ensure that the non-restrictive clause allowing countries like Bangladesh that import from China are unable to grant Chinese merchandise a duty free back door entry into India.

According to an official source who did not want to be named, “The resolution of the situation was mandated as India had permitted duty free import of readymade garments from Bangladesh SAFTA. While in 2006 it was limited to 8 million pieces, later in 201, India lifted the quantitative restriction.

"Bangladesh imports Chinese fabrics and converts them into garments using its cheap labour. Without the need for paying any import duties, it exports these garments to India. Figures cited by CITI indicate that garment imports from Bangladesh increased from USD 106.72 million during April-December period of 2016 to USD 124.14 million in the corresponding period of 2017,” the official disclosed.

CITI Chairman Sanjay K Jain in a media statement said, ”India itself has accepted sourcing restrictions imposed by Japan that hurt its apparel exports to Japan under India-Japan CEPA and in the Goods and Service Tax (GST) regime, the industry has been under severe stress with increasing imports of garments from Bangladesh and other countries. In the pre-GST scenario, import of garments from Bangladesh and other countries were attracting a CVD (Countervailing Duty) of 12.5 per cent and education cess of 3 per cent. However, post-GST, the same has been removed, hence there is no cost for import of garments from Bangladesh and for other countries."

Jain explained that duty free export facility given to Bangladesh under the Least Developed Country clause actually benefitted China to increase its exports. This happens as Bangladesh does not impose import duty on made-in-China fabrics as these raw materials are intended for export from the country. “In sharp contrast Indian garment manufacturers are forced to pay 20 per cent import duty for using the same Chinese fabric,” he further elaborated.