India, EU FTA to help weakening Indian apparel exports

NEW DELHI: The much-awaited free trade agreement (FTA) between India and European Union (EU) is slated to be inked by the end of 2012. This move could help bring considerable improvement in the poor sentiment witnessed in the ailing Indian textile sector.

This information was revealed on the sidelines of the 55th National Garment Fair organised by the Clothing Manufacturers Association of India (CMAI) by Kiran Dhingra, secretary, Ministry of Textiles.

While displaying hope for the FTA, Dhingra said, “We hope the FTA with the EU would be signed by November- December. The textile industry will see a major boost once the FTA is signed.”

Reports suggest that EU is responsible for close to 49% India's annual apparel exports. And this is also one of the primary reasons why this pact holds significance for the industry. Analysts feel that the economic meltdown in the EU has heavily impacted India's apparel exports by more than 50% to that region.

This economic crisis is causing worry to the domestic readymade garment manufacturers who are consistently looking for alternative markets like South America, West Asia and East Asia.

It is believed that during the first half of the ongoing financial year, the apparel exports may continue to stay low as compared to the corresponding period last year. During the second half, the exports are likely to gain pace. Meanwhile, India may attain the revised textile export target of $40.5 billion for FY13.

If the FTA is signed, then the import duty of 9.6% per garment and 5% on other textile items, will end. It is believed that with the inking of the FTA, the targets set for textile exports year-on-year would become achievable.

It is likely that the delay took place due to the differences between both India and EU over issues like opening of India’s automobile market with tariff cut, duties on imported wine and spirits, stricter policy for intellectual property rights (IPR).