Mumbai, India (BBN) – Indian government’s proactive policies, including additional incentives and likely Free Trade Agreement (FTA) with European Union (EU), may drive the growth of the domestic apparel sector, a study said.
The sector is the largest segment of the Indian textile and clothing industry (IT&C), accounting for 60-65 per cent of the total pie. Further, India is the 6th largest exporter of apparel in the world after China, Bangladesh, Vietnam, Germany and Italy, reports PTI.
“The role of government is very crucial for the overall growth of the apparel sector. Government recently announced a Rs 6,000-crore package for textile and apparel sector, which includes additional incentives for duty drawback scheme for apparels, flexibility in labour laws and tax and production incentives to garment manufacturing units.
“Moreover, the government is actively considering an FTA with European Union which will allow duty-free access of Indian garment in EU, the world’s second largest export destination for ready-made garments,” said the report by Care Ratings here.
The Centre, in the budget for 2016-17, has allocated a sum of Rs1,480 crore towards the Amended Technology Upgraded Fund (A-TUF) scheme incentive and Rs 100 crore under the scheme for Integrated Textile Parks (SITP). Furthermore, to encourage the export of value-added products, it also provides higher capital subsidy under A-TUFS to weaving and garmenting units as compared with the subsidy to spinning facilities.

The government recently reduced customs duty rate of 5 per cent on specified fibres and yarns used in the production of apparel to 2.5 per cent. Moreover, the export incentive under the duty draw back scheme has been increased to 10.5 per cent from previous 7.2 per cent along with 3 per cent interest subvention on pre- and post-shipment rupee export credit facility availed by apparel exporters.
Indian apparel exports are expected to remain moderate with increasing competition from Bangladesh and Vietnam along with passage of Trans Pacific Partnership (a trade pact involving 12 countries in the Pacific region).
However, with expected increase in Chinese apparel prices along with China’s reduced focus on clothing and textiles, India has chance of increasing its share in the global apparel exports, the report said.
The global apparel market mainly comprises the world’s large economies of US, EU, Japan and China. USA and EU are the world’s largest apparel importers, accounting for 60 per cent of the total imports, followed by Japan (7-10 per cent).
Countries such as China, Bangladesh, Vietnam, India and Cambodia dominate the exports market.