Dear Friends,

While discussions on recovery are an ongoing feature of the present times, available data suggests that the process remains on a low trajectory.

An economic report for the month of July released by the Ministry of Finance notes that "the increase in Covid cases and the subsequent intermittent lockdowns make the recovery prospects fragile...." Further, the report adds that "the future economic recovery of India is crucially linked to how the Covid - 19 infection curve evolves across the states of India".

Infact, the report also points out that 40% of confirmed cases of COVID-19 are concentrated in the top two growth driving States in India i.e. Maharashtra & Tamil Nadu.

Even the announcements on 6th August, made by the RBI Governor observed that economic activity had started to recover, but a surge in infection has forced the imposition of lockdowns. With the prospects of India's economic growth to contract in the first half of fiscal beginning April 2020, the resolutions of Monetary Policy Committee (MPC) of RBI emphasised that regulatory response has to be dynamic, proactive and balanced during the coronavirus pandemic.

From here, then, three things become critical: demand recovery, regularisation of the working capital cycle, and sustained improvement of cash flows and liquidity.

Coming to EXIM TRADE, it means receipt of new orders, ease of doing business and stability in policies.

Receipt of new orders

The current position with regard to developments in major markets was analysed by the Council at a Webinar organised on July 31 for the benefit of the members. It was noted that in all the major markets India had suffered declines in exports during the Covid period (April - June) on an average by 35% - 40%. Infact in leading markets like China (- 74%), Germany (-38%), U.K. (- 64%), USA (- 46%), the declines were higher as shown in parenthesis.

Ease of doing Business

Ease of doing business is a vital component of EXIM TRADE. The Government's focus on this aspect is highly desirable and worthy of appreciation. Infact constant focus on this aspect has enabled India to improve it's position 16 places and be ranked at 63rd position in the World Bank index measuring Ease of Doing Business in this year.

Some of these facets were highlighted during the CII organised online meeting on the ‘Ease of Doing Business’ held on 30th July attended by the Council.

As per the feedback from the trade, the EDI system for duty drawback, EXIM cargo clearance at customs and ports, online issuance of certificates of origin, GST refunds and filing of returns are all working well.

Yet, there are a number of areas, including allowing error correction if discrepancies found during GST filing or in the EDI shipping bills and an early introduction of online Export Obligation Discharge Certificate (EODC) and Duty Free Import Authorization (DFIA), which need urgent attention as we strive to achieve an industry size of US$ 350 billion by 2025.

TUF Scheme

The procedures under the TUF Scheme also need to be reviewed and necessary simplifications should be done. Some of these issues were highlighted in a recent meeting of the TAMC under A-TUFS held on 29th July under the Chairpersonship of the newly appointed Textile Commissioner.

While the Hon’ble Minister of Textiles along with the Secretary , Ministry of Textiles are doing their best to sort out the various issues, there is an urgent need to focus on procedural simplification such as dispensing with the requirements of putting a serial number on the machinery and the invoices, getting attestation of documentation by Indian Embassies / Consulates overseas, insisting on registration of the  names of the suppliers in the approved list of suppliers etc. which are causing unnecessary delays in disbursements.

The TUF Scheme which has attracted over Rs. 4 lakh Crores of investment and has enabled the Indian Textile & Clothing industry to enhance it's global competitiveness by attracting investments in modern technology should be given a new lease of life by removing the cumbersome protocols being followed by the Joint Inspection Teams (JITs). Also the disbursement pending under the TUF Scheme despite envisaged investments made need to be expedited.

All the above issues have been taken up by the Council with the relevant authorities and we hope to get a solution. In the meantime, members may also intimate the Council about the procedural difficulties faced while undertaking exports or imports.

Stability in Policies

Friends, in a sudden move which caught many exporters off guard, the Directorate General of Foreign Trade (DGFT), on 23rd July, halted the e-filing for Merchandise Exports from India Scheme (MEIS) for exports made from April 1, this year, citing lack of funds.  This abrupt move has hurt the cash flow of the exporters as many of them have factored in the MEIS and other export incentives in their prices.

The Council has made representations to the concerned department and is awaiting a decision.

It is hoped that the issue is resolved at the earliest and the MEIS Scheme is resumed as it is likely to lead to a further decline in our exports in an already demand constricted trading environment.

Further, there is an urgent need to ensure that the policies remain stable for the period they are announced and no ad-hoc changes detrimental to trade interests are made.

Way Forward

Going forward, we believe that any gains coming the way of the textile sector will depend on the strategy of the Government as to how the country’s manufacturing and supply chain assets can be leveraged in the long term. If the policy reforms help in cutting down the competition and improving capacities then industry can be assured of success.

The policy makers should also be able to distinguish between what constitutes "removal of disabilities", or is a "trade incentive" or is "refund of duties and taxes".

India is at a critical juncture today and as we move forward, let COVID-19 be a wake-up call to unlock the country’s textile prowess and empower MSMEs on the basis of a judicious policy mix promoting competitiveness and self-reliance built on the strong edifice of stable policies.


(Dr. K. V. Srinivasan)