India Textile Industry: Response To The Abolition Of Cotton Import Duties

The federal government of India has decided to abolish 14% of the import tariffs on cotton and the price of raw cotton in the domestic market has declined.

Obviously, the real reason behind this measure is to ensure the benefit of the garment and textile industry. So far, they have been faced with high price pressure.

Dr DK Selvaraju, President of SIMA, said that the measures adopted by the government may be welcomed. "Dr

Although the textile and garment industry has been calling on the government to take such corrective actions since October 2007, the government responded somewhat later, but cotton prices may still be in control.

However, to some extent, these measures have indeed created a fair competition for India enterprises in a globalized environment.

Dr Selvaraju believes that the government needs to take some complementary measures to alleviate the current situation and help the textile industry out of the cotton crisis.

These measures include the immediate prohibition of cotton exports until new cotton will enter the market in December 31, 2008.

All cotton exports are carried out through the Cotton Advisory International (CCI) and its state alliance to impose a 5% tariff on cotton exports to alleviate the current crisis.

In addition, the government must ensure that the ratio of inventory to consumption is 40%.

The margin of working capital dropped to 10%, replacing the current 25%, and the agricultural lending rate fell to 7%.

Mr PG Makhija, the executive director of the Ambuja group, suspected that the government's abolition of import tariffs on cotton could not help the textile industry in practical terms.

He stressed that export enterprises were allowed to import cotton without duty.