India doubles tax on textiles in a bid to throttle Chinese imports
It’s the second tax hike on textiles in as many months after an increase on other products including fibre and apparel in July
New Delhi/Mumbai — India doubled the import tax on more than 300 textile products to 20% on Tuesday as the world’s biggest producer of cotton tries to curb rising imports from China.
It was the second tax hike on textiles in as many months after an increase on other products including fibre and apparel in July.
The moves are expected to provide relief to the domestic textile industry, which has been hit by cheaper imports. India’s total textile imports jumped 16% to $7bn in the financial year to March 2018. Of this, about $3bn was from China.
The government did not disclose details of the 328 textile products that will be subject to the duty increase. Rising imports sent India’s trade deficit with China in textile products to a record high $1.54bn in 2017-18, alarming industry officials as India had been until recently a net exporter of textile products to China.
Sanjay Jain, president of the Confederation of Indian Textile Industry, said he did not expect China to retaliate to the Indian duty increases as it still had a trade surplus with India.
He said India’s textile product imports could fall to $6bn in 2018-19 as a result of the tax increase to 20%. India’s imports of textile products from Bangladesh, Vietnam and Cambodia also jumped in the past few years as they are not subject to any duty under free trade agreements (FTAs) signed by India with these countries.
The 20% duty will not be applicable to products sourced from those countries due to the FTAs, Jain said.
Industry officials say in the past few months Chinese fibre has been shipped to Bangladesh and processed and exported to India with zero duties.
Jain said India’s textile and garment exports could rise 8% to $40bn in 2018-19 due to a weak rupee and as the state is expected to introduce incentives to boost overseas sales.
India’s trade differences with the US have also been rising since President Donald Trump took office.
India, the world’s biggest buyer of US almonds, in June decided to raise import duties on almonds and some other US imports by 20%, joining the EU and China in retaliating against Trump’s tariff hikes on steel and aluminium.