In an attempt to reduce dependence on the European Union and United States for growth, Indian garment exporters are exploring opportunities in Iran.A delegation led by the Ministry of Commerce and accompanied by over half a dozen industry officials recently met with their counterparts there. The Indian delegation discussed a host of issues including prevailing taxes and relaxation in policy support for hassle-free export of textiles to Iran.
“Although the United States and the European Union are important markets for us, we are exploring new markets for textiles exports to reduce our dependence on these two regions,” said Rashmi Verma, Secretary, Ministry of Textiles, on the sidelines of an event in Mumbai.
India has remained absent from Iran’s markets not because of preferential treatment like European Union, but on account of extremely high import tax levied by the Iranian government. An import tax of 200% was levied on apparels and textiles until two years ago which has been gradually slashed to 55% and 32%, respectively.
Following the Indian delegation’s visit, however, tax authorities in Iran have agreed to reduce import duty on textiles and apparels to a 20-25% level or even lower over the next two years.
Exploring new markets has become critical for Indian textiles exporters due to falling shipments to traditional markets such as the United States and the European Union, which account for over 60% of India’s textiles and apparel exports.
Owing to preferential treatment given to the countries like Pakistan, Vietnam and Bangladesh, textiles shipped to such buyers works out to be uncompetitive for Indian exporters. Consequently, India’s exports have declined over the last few years.
After setting a target of $47.5 billion at the start of the fiscal year ending March 2016, India’s textiles exports managed only $38 billion, a marginal decline from $40 billion in the previous year. With a host of incentives and a Rs 6,000 crore package announced in the last few months to boost textiles and apparel exports, the government has set a target of $50 billion for FY2017.
“The targets look achievable,” said Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI).
Confirming India’s outreach, Mehta said Iran’s market size stands at $16 billion, of which only 40% comes from domestic sources. The rest is met through imports, largely illegal, he added.
“Interestingly, China’s market share in the world’s textiles and apparel segment has declined to 38% from 40% from a couple of years ago due to rising cost of production on higher labour cost. So, China is creating a vacuum which India can exploit to increase its market share from the existing 5%,” said Verma.
“Iran offers immense of opportunities for textiles and apparels exports for India being the Islamic country a gateway for European markets with a combination of western and traditional taste,” said Mehta.
Referring to an Ernst and Young report, Texprocil chairman R K Dalmia forecasts India’s textiles exports to rise by 9% CAGR (compounded annual growth rate) to $62 billion in five years from $40 billion in 2016. The domestic textiles market is set to grow 5.2% annually to $80 billion by 2021 from $62 billion in 2016.