Centre plans export incentives in textile sector

New Delhi: Textile exporters may soon get a fresh set of incentives to expand their business in European and other markets, according to proposals being considered at the commerce ministry.

Textile ministry officials were in talks with the commerce ministry to finalize the incentives, they told a parliamentary committee last week.

“These incentives, if and when they come, will go a long way in helping Indian textile firms enter the European markets, which currently slap high levy on Indian exports,” a parliamentarian involved in the discussion said on condition of anonymity. “The proposed incentives will be aimed to offset these levies.”

While the rate of incentive is still being debated, it would offset the proposed carbon tax of the European Union and a few other levies, officials said, declining to be named.

The proposed incentives are being discussed at a time when the European Union’s proposed Carbon Border Adjustment Mechanism can see higher tariff on Indian goods. New Delhi is opposed to the proposed levy as it might make it more difficult for Indian companies to compete against China and other manufacturing hubs.

Europe is India’s third-largest export destination; the country exported goods worth $41.36 billion to the continent in 2020-21, official data show.

India does not have free trade agreements with the European bloc and the US, but have entered into such pacts with Mexico and the United Arab Emirates. “The two countries are also seen as potential launch pad for Indian exports to the Western countries,” said an official.

New Delhi and Abu Dhabi agreed on free trade last month. India’s major exports to the emirates include refined petroleum products, minerals, cereals, sugar, fruits, vegetables, tea, meat, seafood, textiles, engineering, machinery products, and chemicals. India imports petroleum and petroleum products, precious metals, stones, jewellery, minerals, chemicals and wood products from the West Asian country.

“We were also informed that the government is in advanced stages of talks with the UK and Australia,” said the parliamentarian cited earlier. “The officials told us that the Centre has a target of reaching $500 billion in exports by the end of the next financial year.”

A boost for textile exports will have a significant effect on the domestic market. The textile sector provides employment to at least 45 million people and is regarded as one of the largest employers in the country, besides the agriculture and services sectors.

The textile sector contributes 7% to industrial output in value terms, and around 15% to India’s export earnings, according to trade ministry data.

“There is a growing market for our cotton products and man-made filaments,” another MP present in the meeting said, requesting anonymity. “The incentives would be aimed to boost the export of these products.”

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