FROM THE EDITOR-IN-CHIEF’s DESK…
The picture is just getting bleak for the garment export industry... The whole month, I have been hearing only worried voices, but post the announcement of reduced duty drawback rates, the scenario has become worse.
At a recently concluded event in Bangalore, the major discussion centred around how the export industry is on a suicidal route and companies now have to start thinking of going local, before it is too late... No one really understands why the Government does not appreciate the industry for its employment generation potential and encouragement is not forthcoming. The type of mails that I am receiving are indeed dejected and for once right from the AEPC to the common exporter..., the reaction is unanimous – shocked...! One exporter wrote, ‘Survival and the future of RMG exporters is doomed’. The AEPC Chairman writes with equal passion: ‘The present new rates are unacceptable’.
Though one may argue that the move was anticipated and exporters should have been prepared for the same…, But the fact is that the lobbying was strong, and everyone was hopeful that with a pro-active minister at the helm, the reductions would be minimal…, certainly not so drastic!
There was a general feeling that the present drawback rates would continue till such time when final consultation regarding issues arising out of GST implementation are sorted out and proper measures are taken to ensure that exports remain zero-rated and no taxes are exported.
How can the Government expect exporters to think of expansion, when the very foundation of competitiveness has been shaken? State Governments may go all out to promote investment in their regions, claiming many incentives, but is anyone listening to their worry of keeping their existing factories running profitably?
It is a Catch-22 situation – if we don’t move to a zero-duty drawback regime, our commitment to WTO stands violated, but if we start reducing drawbacks before every tax pain point is sorted out, the industry will be penalized.
The Textile Ministry needs to look into the matter more pragmatically… No one is refusing the reality that duty drawbacks have to go, but the way the market is placed today, the move to drastically cut down the support would certainly be a setback for the industry.
The domestic manufacturing industry on the other hand is much more positive and with ‘Make in India’ gaining momentum, the focus is just on manufacturing, not the markets.
Of course, the potential of the domestic retail in garmenting is still largely unrealized and with many international companies looking at
India as a market, it makes strategic sense for exporters to also explore opportunities… But it is easier said than done; the way the domestic market works is completely different from how exporters are tuned to work. Right from order placement to resource procurement to delivery expectations… the system requires a different mindset.
Also, why would an exporter want to vacate the international edge that he has earned over the years… It is a space which is not only the one that he is familiar with, but also the one which has made his company the business entity that it is.