Increasing import duty on textile and other products likely to boost Indian industry

With an aim to further incentivize the domestic textile industry, Indian government has increased the import duty on textile products for the second time in a month, doubling customs duty on 328 tariff lines of textile products from 10 per cent currently to 20 per cent. It is expected that this higher duty will help the Indian textile industry, which employs nearly 10.5 crore people and has been facing stiff competition from cheaper imports, particularly from China.

This new move is likely to make imported garment, fabrics, specialized fabrics and carpet, among other items, costlier. Higher duty will now be applicable on shirt, trousers, coat, blazers, kids’ garments, lingerie, etc. This is to be noted that only a month earlier, the Government had doubled the import duty on over 50 textile products, including jackets, suits and carpets, to 20 per cent.

However, concessional tariff will still be applicable for least developed countries such as Bangladesh, which amounts to saying that there will be no such provision in respect of imports from China and hence the higher duty will impact China the most, curbing cheaper imports from our big neighbor.

In dearth of any direct incentive from the Government to the domestic manufacturing industry, this decision is being hailed as a good ‘protective measure’ and will help the ailing textile industry in its attempts at revival. Despite India being world’s biggest producer of cotton, we have to bring in measures to curb rising imports of textile products from China. It is to be noted that India’s imports of textile products from Bangladesh, Vietnam and Cambodia also increased significantly in the last few years as they are not subject to any duty under free trade agreements (FTA) signed by India with these countries.

Trade pundits in TPCI are of the opinion that this Indian move to increase duty is not likely to see any retaliation from China as China still has a trade surplus with India. However, rules of origin need to be implemented on textile products or else Chinese products will start coming from other countries.

Remarkably, in June this year, India had joined the European Union and China in retaliating against President Trump’s tariff hikes on steel and aluminium by increasing import duties on almonds and some other US imports by 20%. This increased tariff on US goods will be applicable from 18^th September. India is the world’s biggest buyer of US almonds and India’s overall trade differences with the US have also been rising since President Trump took office.