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Formulate specific policy

Even as the new Foreign Trade Policy (2004-09) has announced some significant reliefs for the export sector in terms of continuation of the DEPB scheme, withdrawal of service taxes for EoUs as also removal of age restriction for imports of capital good under the EPCG scheme, there is still need for a special scheme for the textile sector keeping in view the post-MFA contingencies. Textiles being the single largest export earner for the country and the potential it holds in the fast changing trade order, we should formulate a set of specific policy measures that can help it face future challenges in a much better manner. Moreover, the policy itself may not bring about the necessary changes. Towards this end, an efficient implementation mechanism is also called for. The policy should aimed at preparing the industry face trade-related contingencies which if not attended properly, may eat into its global market share. At the same time, it should help build an efficient production base. The industry will have to chalk out strategies to face trade barriers. However, it is not the regional trade agreements that are driving business or altering the global trade pattern, but it is the end of quotas.

End of quota means textile producers could take advantage of single country sourcing in stead of transporting components to unrestricted or less restricted locations. We have seen as to how China’s share which was 15 per cent in US imports in 2001, grew considerably to around 70 per cent in 2003. In a quota-free environment, major importers will favour locations with vertical capabilities i.e the availability of production from the point of yarn to fabrics to finished goods without extensive lead times and transportation cost. Vertical integration allows companies to meet increased price competition and increased pressure to shorten the fashion cycle with shorter production cycles. This will be the area where Asian suppliers like India will have an edge. Currently, the US importers are trying to reduce merchandise cost structure and increase flexibility in the supply chain. Speed, quality, legal compliance, logistics and product costs are the core considerations in the sourcing decision.

the past 10 years, textile and apparel imports of the US have gone up to around $ 40 billion in 2003 from around 14 billion in 1992. With 35.27 per cent share, Asia has the biggest share in the US imports; followed by NAFTA countries with 20.17 per cent share, south Asia 15.26 per cent and 10 per cent CBI countries. Though at 23.5 per cent growth rate, India is one of the fastest growing top suppliers to the US market, there is still a plenty of scope for increasing the market share. The share of the Indian textile industry in the global textile trade has remained poor at around 2.8 per cent.