Apparel Exporters Want Hike in Duty Drawback Rates

Prelims level : Economy - Trade Mains level : Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth
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  • Apparel exporters have appealed to the government to review the duty drawback rates announced recently for readymade garments
  • The new rates announced by the government were 2.20 %-2.52 % percentage points short of what the council had sought.


  • The drawback neutralizes customs duty and excise duty component on the inputs used for products exported. This is offered at fixed rates independent of tax levied on inputs.
  • It is a relief by way of refund/ recoupment of custom and excise duties paid on inputs or raw materials and service tax paid on the input services used in the manufacture of export goods.
  • Duty drawback provisions are given under section 74 and 75 of the Customs Act, 1962. Section 74 allows duty drawback on re-export of duty paid goods. Whereas section 75 allows drawback on imported goods used in the manufacture of export goods. In order to facilitate the drawback procedures, the Central Government is empowered to make rules
  • The revised rates of duty drawback will help address the concerns of these export sectors and make India’s exports more competitive in global economy
  • The higher duty drawback rates together with timely refunds will help exporters retain their competitiveness

Importance and Potential of Apparel Sector:

  • The Indian textile industry is set for strong growth, buoyed by both strong domestic consumption as well as export demand
  • The sector employs one of the vulnerable and underemployed gender of the India mainly women and it reinforces their financial freedom
  • The fundamental strength of the textile industry in India is its strong production base of wide range of fibre/yarns from natural fibres like cotton, jute, silk & wool to synthetic /man-made fibres like polyester, viscose, nylon & acrylic
  • The sector is expected to reach USD226 billion by FY2023
  • Population is expected to reach to 1.34 billion by FY2019 and so the labor force & clothing needs
  • Urbanization is expected to support higher growth due to change in fashion & trends
  • The organized apparel segment is expected to grow at a Compound Annual Growth Rate of more than 13 per cent over a 10-year period
  • India accounts 63 per cent of the market share of textiles and garments
  • India accounts for about 14 per cent of the world’s production of textile fibres& yarns (largest producer of jute, 2ndlargest producer of silk and cotton; & 3rd largest in cellulosic fibre)

Benefits of Apparel Industry:

  • Research and records have established the high potential of the apparel sector to create about 70 jobs for every crore rupee invested, much higher than the other manufacturing sectors.
  • As high as Rs 26,000 crore are given out as salaries and wages every year by this industry.
  • The most significant advantage lies in the high employability of women in this sector at every level- from a sewing machine operator to the CEO of a brand.
  • It can greatly boost the export led growth of the Indian economy

WTO Conditions:

  • The government also has to be careful now in giving duty drawback and ensure it is strictly according to inputs consumed as India is no more eligible to give export subsidies as per global trade rules as its per capita Gross National Income has crossed $1,000 for the third year in a row.
  • The MEIS (Merchandise export incentive scheme) scheme, too, could be questioned by WTO members as it is an export subsidy and no more permitted.
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