Textile exporters in India will soon be deprived of direct subsidy schemes provided to the sector. The Indian Government has decided to phase out these export facilities by December 2018 as per World Trade Organisation (WTO) rules.
The WTO rules do not permit least developed and developing countries to give such benefits to its exporters when a sector achieves 3.25 per cent share in global exports.
In the case of textile industry in India, it had crossed the above mentioned threshold in 2010 itself. At present, India has 5 per cent share in global textile and garment trade. The WTO rules state the subsidy offered to that particular sector has to be weaned off within eight years.
If there is any objection filed by members for the delay in getting fit into WTO ruling within the said deadline, the country which fails to comply with norms are provided more time to introduce required changes in the rules.
It’s not only WTO, India has been facing pressure from the US also to introduce new norms under its textile policy. The US claims that all forms of export subsidies offered for the sector should have been abolished by 2015 only as India had reached “export competitiveness” in textile and clothing no later than 2007.
The exporters need not be worried as the Ministry of Commerce is mulling to roll out some other policies considering the WTO rules such as ones for quality upgradation and subsidising capital expenditure.
The Government has also assured that these changes will be made effective gradually so that popular schemes like interest Subvention or Merchandise Export from India Scheme will not be removed immediately. Moreover, policies and schemes equivalent to the ones being phased out will soon be brought in.