Kolkata: Textiles will be among the sectors that will be hit by the 50% US tariffs. To shield this labour intensive sector from the strong headwind, the Centre has decided to allow import cotton till the end of this year, said reports. Textiles has been marked as especially vulnerable to this whimsical tariff by the US President since this country accounts for about 25% of the textile exports from India.
The Centre is seized with the overriding challenge to find a quick response to the 50% tariff imposed by White House. The quickest step to announce after the 50% tariffs kicked in on August 27 was the decision to allow duty-free imports of the raw material. Duty-free imports of cotton is expected to stabilise costs of the principal raw material costs. If the raw material cost goes down, it can boost competitiveness of the entire sector.
Cotton textile exports account for 33 per cent of India’s total textile exports, reports say and since the sector is labour intensive, the step could eventually help the livelihoods of millions of people. The duty exemption came against a backdrop of persistent gap between demand and supply. Recently Reserve Bank governor Sanjay Malhotra said that they are exploring all opportunities to support the sector hit by the sudden US tariff.
“We are looking at a hit of at least 20-25 per cent for the next six months, if I am considering some amount of re-orientation to be done because otherwise the figure is 28 per cent of exports, largely apparel and made-ups,” Chandrima Chatterjee, secretary general of Confederation of Indian Textile Industry was quoted in the media as saying.
“Our industry is already experiencing the effects of the tariff hike, with potential losses and order cancellations. We are exploring alternate markets and strategies to mitigate the impact of the US tariffs. We are also in active discussions with the Ministry of Textiles and Ministry of Commerce & Industry,” Sudhir Sekhri, chairman of Apparel Export Promotion Council was quoted as saying.
Duty-free imports will also help Indian textile manufacturers/exporters to explore other markets as the US market becomes unsustainable. The duty-free import decision was notified by the Central Board of Indirect Taxes and Customs. The decision is likely to cool prices, and thereby inputs costs, at different stages of the textile chain — yarn, fabric, garments and even made-ups. In the textile industry, “made-up” means a sewn and assembled from fabric such as ready-made garments, home furnishings etc.
But in that case, what would happen to the interests of cotton farmers in the country? Farmer interests will be safeguarded by the Minimum Support Price structure which is administered by the Cotton Corporation of India. The basic objective of this scheme is to ensure that at least 50% more than the cost of production is delivered to the farmers.