Pressure is mounting on India at the World Trade Organisation (WTO) to pare subsidies and incentives given to its textiles sector.
The European Union and Japan have joined hands with the US and Turkey to demand that India stop giving fresh subsidies and gradually phase out the existing ones as the textiles sector had already achieved export competitiveness.
India, however, maintains that many of the subsidies identified by the US and others are not subsidies and merely a reimbursement of input duties. It said before the phasing out happens, there has to be a common understanding on what the subsidies are.
The issue came up for discussion at a recent meeting of the WTO Committee on Subsidies and Countervailing Measures.
“We agree that the textiles sector in India has achieved export competitiveness, as defined by the WTO. But, we have some time to phase out subsidies and many of the incentives given to the sector cannot be classified as subsidies at all,” a Commerce Department official told Business Line .
In an indirect reference to the new package of incentives announced for exporters in the Foreign Trade Policy last month, the US said it was concerned about press reports on India providing new subsidies to its textile industry.
Textile export is important for India’s economy as the sector is the largest job provider in the country. With the downturn in global trade reducing demand for exports, the Government has been providing several incentives to exporters.
Turkey said export subsidies by India had created unfair competition for Turkish textile industry. It urged India not to implement new programmes, and said it was ready to discuss this issue with the country.
Japan and the EU also expressed concern and said that the matter had to be sorted out soon so that there was a check on subsidised exports.
The WTO allows countries with per capita income below $1,000 to give export subsidies till exports are lower than 3.25 per cent of world trade in that particular commodity. India’s share in the global market for textiles crossed the limit in 2007, according to WTO records, and is almost four per cent at the moment.
Since countries are given eight years to remove the subsidies, India has time till 2015 to do so.
“There is also no clarity over whether India actually crossed the threshold in 2007. We have to reach an agreement even on this,” the official said.
India’s garments exports in 2012-13 declined 12.23 per cent to $8.4 billion while exports of cotton yarn, fabrics and made-ups increased 10 per cent to $7.5 billion.
amiti.sen@thehindu.co.in