China is fast being taken over by Bangladesh and Vietnam in apparels and Vietnam and Indonesia in case of leather and footwear.
But Indian companies are struggling in face of a set of common challenges related to logistics, labour regulations, tax & tariff policy and disadvantages emanating from international trading environment compared to competitor countries, it added.
The Survey said apparel exporters will get relief to offset the impact of state taxes embedded in exports, which could be as high as about 5 per cent of exports, as part of the package approved by the government for textiles and apparels in June 2016.
The introduction of GST offers an excellent opportunity to rationalise domestic indirect taxes so that they do not discriminate in apparels against the production of clothing that uses man-made fibers; and in the case of footwear against the production of non-leather based footwear, the Survey said.
“On labour costs, India’s source of comparative advantage in this sector, also seem not to work in its favour due to problems like regulations on minimum overtime pay, onerous mandatory contributions that become de facto taxes for low-paid workers in small firms that result in a 45 per cent lower disposable salary, lack of flexibility in part-time work and high minimum wages in some cases,” noted the Survey.
India imposes a 10 per cent tariff on man-made fibers vis-a-vis 6 per cent on cotton fibres.
The global demand for apparel is moving from cotton fibre products to manmade fibre and footwear of non leather, it said, highlighting that India’s competitors enjoy better market access by way of zero or at least lower tariffs in the two major importing markets, namely, the US and EU.
(This article has not been edited by DNA’s editorial team and is auto-generated from an agency feed.)