India doubles Export Incentive for ready-made garments

The Indian government doubled the incentive for exporters of garments and made-ups under the Merchandise Export from India Scheme (MEIS) to support declining textile exports for a period of eight months with effect from 1 November 2017 till 30 June2018.

The move is an attempt to reve rse declining exports and is expected to bring major relief to the two sectors that took a beating after the implementation of the Goods & Services Tax (GST) regime. 

Exporters of garments and made-ups in India will get 4% of the value of their exports back in the form of duty exemption scrips.  This increase is up two percentage points. These can be used to pay duties on inputs. 

India's total exports fell 1.12% in October to US$23bn. Within that, garment exports slumped 39.2% for the month to $829.4m following the roll-out of the goods and services tax (GST) in July. 

In the pre-GST regime, cotton garments enjoyed a 12% incentive on duty drawback and rebate on certain state levies known as Remission of State Levies (ROSL). But this has been slashed to 2% on duty drawback and 0.39% on ROSL.  

The made-ups sector, which includes products such as towels and bedsheets, is the second-largest employer in the textile sector after apparel. The cabinet last year approved a set of reforms including simplified labour laws and technology upgradation for the sector besides a Rs 6,000 crore package for employment generation and promotion of textile exports.  

A report in October showed India's textile exports have remained stagnant in the past four fiscal years, after growing at a compound annual growth rate (CAGR) of around 13% between FY2010 and FY2014 in US dollar terms, driven by apparel, home textiles and cotton yarns. 

The report put the slowdown in the apparel sector down to subdued demand in the key consuming regions of the US and the European Union (EU). Cotton yarn exports have also been under pressure, and the recent revision in duty drawback rates has added to this pressure.  

The industry has also faced intense competitive pressures from other leading textile exporting nations such as Vietnam, Pakistan and Bangladesh. Bangladesh and Pakistan enjoy special duty benefits under GSP on shipments to the European Union. 

Back to Index of September - December 2017