India’s Custom Duty Hike On Textiles May Not Boost Domestic Manufacturing Significantly

Trade & Policy

India’s Custom Duty Hike On Textiles May Not Boost Domestic Manufacturing Significantly

Indian textile industry has welcomed the Govt.’s gesture to increase the custom duty on over 300 textile products. The move aimed at providing protection to domestic textile manufacturers against cheaper imports and providing impetus to ‘Make in India’ campaign. While the industry was apprehensive about rising imports and often cited double digit import growth of textile items, the recent hike in custom duty may not be enough to safe guard the industry and jobs. Analysis shows that in the 328 textile products where custom duty has been doubled from 10 percent to 20 percent, India’s import was mere US$ 364 million as against export of US$ 10.12 billion. This implies that the Indian industry is fairly competitive in these products and other exporting countries have not been able penetrate the Indian market. Here to note that India’s textile import jumped 16 percent to touch US$ 7 billion in the last fiscal (FY 2017-18) while textile export grew to US$ 39.7 billion.

Thus, if the Govt. wishes to give an edge to domestic manufacturers and exporters, policy makers have to take a pragmatic look into reimbursing all the input taxes. Some of the taxes paid by the textile manufacturers on purchase of goods (goods that are not included in GST) are not adequately compensated and adding to cost of manufacturing.