India moves to offset GSP removal fallout

India yesterday approved a scheme to make its exports of apparel and home textiles more competitive, two days after the US announced to scrap the preferential trade treatment for the country.

The approval was given at a meeting of the cabinet presided over by Prime Minister Narendra Modi.

Under the proposed measures, rebate of all embedded state and central taxes and levies for apparel and made-ups segments would make exports zero-rated.

The move is expected to boost India's competitiveness in export markets and ensure equitable and inclusive growth of the textile and apparel sector, an official statement said.

The assessment in India is that the US decision to cancel the generalised system of preferences (GSP) is unlikely to have a big impact on the domestic textile and apparel sector.

The withdrawal of the GSP from the existing list of products will not have a major impact on India's garments export, but if the list is expanded the effect would be 30-35 percent of India's RMG exports going to the US, said Rahul Mehta, president of the Clothing Manufacturers Association of India.

According to the India's Apparel Export Promotion Council, the US imports $586.58 million worth of RMG products from different countries under the GSP status and India's share is $17.97 million.

Tirupur Exporters Association President Raja M Shanmugam said though the impact seems to be minimal for the garment sector, which is the second largest employment generator in the country, even this could lead to job losses.

He asked the Indian government to help the industry, which will see price increase if the US decides to withdraw the status, by way of incentives. Tirupur in Tamil Nadu state is the largest hub of Indian apparel manufacturing.