India has opened its gates to apparel imports from Sri Lanka. Minister Anand Sharma, during his recent visit to Colombo, has decided to liberalize the import restrictions. The Indian Government has agreed to remove all restrictions related to textile and apparel trade with Sri Lanka. The country now has better access to the Indian market.
Under the current agreement of ISFTA (India Sri Lanka Free Trade Agreement), India has granted two sets of apparel quotas to Sri Lanka with zero duty. Under these terms, 3 million apparel pieces can be exported from Sri Lanka into India annually, without any fabric sourcing requirements from India. Sri Lanka can further export another 5 million pieces to India provided the fabric sourcing is made from India. During the past three years, Sri Lanka was able to export the 3 million pieces, but out of the further 5 million pieces quota, it was able to utilize only up to 10 - 15%.
Under the new relaxation, Sri Lanka will be permitted to export 8 million pieces of ready-made apparels to India without any duty under the India-Sri Lanka free trade agreement. A notification granting the process is likely to be passed in the next few weeks. Apart from the proposed duty-free trade agreement, the Indian ministry has also planned other programs to enhance the trade relations between the two countries. The initiatives include:
Initiatives will be taken regarding India-Sri Lanka cluster development to enhance business ventures.
Plans are chalked for exchanging the culture of fashion designers and technologists of the two countries.
Increase sourcing options for Sri Lanka. A sourcing show will be hosted in Colombo, which will also be an invitation for buyer-seller meet.
India Sri Lanka Trade:
Sri Lanka is gradually emerging as a strong apparel manufacturer, satisfying the quality demands of Indian importers. Imports of woven garments from Sri Lanka into India have increased by 500% in the past four years. Retail sector in India is experiencing a boom in II and III tier cities pushing the demand for fashionable clothing. The proposed duty free access of 8 million pieces will give a big boost to Sri Lankan apparel exports.
Sri Lankas Exports to India
Articles of apparel & clothing accessories (HS code 61& 62)
As per 2011 statistics Sri Lanka has exported apparels worth of $ 50 million of which garment exports to India were of $ 25.56 million. Major export items from Sri Lanka were men's jackets, suits, ensembles, vests, shirts, women's coats, dresses, skirts, lingerie, and kid's apparel. Once the Government notification is issued, Sri Lanka will be able to export readymade apparels to India at zero duty under the ISFTA.
Approximately 80% of fabrics used in Sri Lankan apparel industries are imported. 50% of the knit fabrics are being sourced locally, but major share of woven fabrics are only imported. Earlier trade agreement between India and Sri Lanka includes a condition that after 3 million pieces of apparel, a further 5 million pieces of garment can be exported, provided fabrics for these 5 million pieces are being sourced from India. But this condition is being relaxed currently. India's current relaxation has opened doors for Sri Lanka's garment makers to import fabric from any country apart from India. Still, considering cost efficiency, India proves more profitable. By analyzing the trade statistics of the past decade, it is clear that India's fabric exports to Sri Lanka will enhance in the coming years. Among the Asian countries China and India are major textile manufacturers. China is also a major supplier of textiles to Sri Lanka. But the escalating costs in China would eventually result in India getting a major share of textile exports to Sri Lanka.
India is ranked as the 14 biggest international market wise distribution destination of garment exports during 2011. As per the international trade estimates, present share of India textile and apparel sector in the global trade is very promising with 4.5% (as on March 2012) and is positively expected to boom reaching $80 billion by 2020 making a 20% share.
The duty free access into India is positively expected to benefit both the countries, by improving exports from Sri Lanka, and increasing the volume of imported readymade apparels into the Indian market to meet the requirements of the growing Indian retail industry.
References:
1. Defence.pk
2. Lankaweb.com
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