A customs duty of 4% ad valorem had been imposed a few years ago to compensate the domestic industry for various local taxes applicable on domestic output. This has been withdrawn by the government.
This duty reduction implies that Indian imports of several textile products, including fabrics, made-ups, apparel and some yarns would be cheaper by about four percent. Imports of PFY and fabrics in particular have been growing steadily, and the latest cut in customs duties may provide a significant push to imports.
In addition, the peak customs duty has been reduced from 25% to 20% ad valorem, which means the customs duty on a large number of products related to the textile and apparel industries would decline by five percentage points automatically. However, the basic customs duty on many textile products, including fibers and yarn, is already 20% and, therefore, this reduction would not have a significant impact on textiles and apparel imports.
In the first week of January, the government of India announced a slew of measures which are being described as a mini-budget. There are talks of elections being rescheduled from November to April or May and, therefore, several more decisions can be expected through January. A more determined effort to make the debt restructuring scheme for textile firms get rolling has become a distinct possibility. Under this scheme, interest rates on existing loans are to be cut by an average of about five percentage points.
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