In the new regime, exporters have seen the cost of working capital rising and are experiencing fund crunch due to delays in the refund of taxes paid.
Low rupee needed for a few months
Rahul Mehta, President, Clothing Manufacturers Association of India said, “If Re remains at 68/69 levels for the next few months, it can offset the loss of Duty Drawback to some extent and may see a growth of three-to-five per cent.”
Exporters have said that while consumption in the international market is growing at around one to two per cent, competition is increasing too, as the business sees new entrants like Myanmar and Ethiopia. Competitors’ currencies are also depreciating, but they don’t have problems that Indian exporters do.
Falling production of apparels
Fall in apparel exports has led to a decline in production. According to the latest IIP figures, quoted by the Apparel Export Promotion Council (AEPC), India's apparel production fell 18.6 per cent in the month of March and saw a decline of 11 per cent for the period 2017-18.
March saw the eleventh straight monthly decline in apparel production.
"Last year (2017-18), the industry witnessed strong growth, but the continued backlog in GST and RoSL (refund of state levies) is affecting the sentiments. We would like the government to address the issue at the earliest, so as to reverse the trend of stagnating exports," said HKL Magu, chairman of AEPC.
Other costs also high
Best Corporation caters to global brands including Mothercare. Its managing director R Rajkumar said that apart from the delay in refund of levies and reduction in drawback, "Availability of manpower is also a big concern in all the existing textile centers and productivity is low due to huge labour turnover."
Apart from these, high costs of raw material and labour also put pressure, according to R S Jalan, managing director of GHCL. He said, "All these put together makes Indian exports at least 10-12 per cent costlier than competing countries. Ususal margins have been in the range of five per cent only, and hence, high cost is hurting both the topline and the bottomline."
Led by AEPC, the apparel exporters have urged the Centre to look at schemes to boost exports, besides looking at labour laws, as their protection is directly linked with productivity, in which India is far behind peers like Vietnam and Bangladesh.
Further, Ashok G Rajani, former Chairman of AEPC stated that it was disappointing that the Government was not looking at this sector seriously or helping, despite the fact that textile is one of the largest employment sectors in the country. "Every $1 billion of additional business can create 700,000 jobs. But, after the implementation of GST, withdrawal of duty drawback, delay in refund and lack of incentives to the sector are resulting in units to shutting shop," he said.
Meanwhile, an exporter from Tirupur, the knitwear hub of India, said that while India's apparel exports growth dipped, competing countries like Bangladesh and Vietnam are growing at around five to ten per cent.
The price difference between Indian and Bangladeshi products is around 20 per cent. Vietnam has a cost advantage of around 10 per cent, while also having increased its production as more Chinese and Taiwanese players have set up their factories in the country.
According to Tirupur-based exporters, those operating in niche areas and exporting premium products have been able to survive.