With exports falling for the third consecutive month in December, industrialists in the knitwear city are worried about downward business trend in the readymade garments (RMG) segment. RMG exports from the country plunged 40% year-on-year (y-o-y) in October and by 10%-13% y-o-y in November and December respectively.
Exporters believe that the central government was yet to realise the importance of providing incentives or the need for FTAs (Free Trade Agreements) for RMG with US and European countries to boost growth. "While the central government is making macro-economic corrections including demonetisation and GST, it has failed to realise the importance of hand-holding support like providing the right rate of duty drawback and other incentives," said Tirupur Exporters' Association (TEA) president Raja M Shanmugam.
Earlier, the government stated that if firms pay GST, they would be able to get input credits. But the government did not bother about the effect of reduction in incentives ranging from duty drawback, rebate of state levies (RoSL) and merchandise exports from India scheme (MEIS), Raja Shanmugam said.
After constant requests from the industrialists, the government came forward to increase MEIS—that too till June, from 2% to 4%. Still overall deficit of the incentives stands at 2.7% compared to the pre-GST period.
So, Tirupur knitwear exporters, who operate on thin profit margins due to stiff competition, were not able to quote attractive rates to international buyers, said A Sakthivel Regional Chairman Federation of Indian Export Organisations (Southern Region).
"Once exporters lose buyers, it would not be easy to regain the business relationship. The knitwear industry has already been weakened due to multiple reasons including depreciation in the US dollar. The implementation of GST has become a death knell blow to the industry," Raja Shanmugam stated.
"There was a notion that in developing countries providing sops to the export firms was not necessary. But it is wrong. The government should provide sops and adequate infrastructure to ensure the sustainability of the industries," he said.
Referring to a recent tour of TEA office-bearers to Vietnam, Raja Shanmugam said, "We are self-certifying our nation as a traditional textile-oriented business hub but many new competitors like Bangladesh, Vietnam and Cambodia have overtaken India in the RMG exports and made-ups."
For instance, Vietnam, which had entered into the business only two decades ago, is exporting textile products to the tune of Rs. 2.2 lakh crore annually despite being an importer of cotton, he pointed out. India's business stands at only Rs.1.6 lakh crore, he said. "Their government's incredible support and Free Trade Agreements with the largest garment importing countries were major reasons for Vietnam's success," he said. "There is a vast gap between the policy makers and the industry. The government should bring in knitwear welfare board, a dedicated research institute, and labour oriented measures, apart from restoring all the incentives," senior industry officials said.