cotton yarn, fabrics, ready made garments and knit wear

Experience of India in promoting Textile Industry & recommendations for Uzbekistan

Indian Textiles- Over View

The Indian Textile Industry is growing at 20% and accounts for 4% of India’s GDP.

It contributes 14% to the Industrial Production Employs about 38 million people. Expected to

generate 12 million new jobs by 2010. 18% employment of industrial sector is in

textiles It accounts for 30 % of India Gross Export

Earning.


India contributes 20% to world spindlage capacity, the second highest spindlage in the world after China. It contributes 6% to the world rotor and 62% to the world loomage.

12% of the world production of textile fibres and yarns is from India. India is the largest producer of Jute, second largest producer of silk and cellulose fibre / yarn, second largest producer of cotton and fifth largest producer of synthetic fibres / yarns.


Textile exports are targeted to reach $50 billion by 2010.

Many worlds' leading brands like Wal-Mart, Marks & Spencer, Carrefour, Banana Republic, Tommy Hilfiger, Gap, Liz Claibome, Polo etc, are sourcing products from India.

Experience of India

Government policies of liberalization and the innovative supports over the past couple of years have shown tremendous growth

Government has adopted simplification of procedures and formalities for the exporters

Experience of India

Concept of EOU: No VAT, No excise Duty, 75% Export and 25% Domestic Sale allowed

Concept of SEZ/ EPZ: Relaxed Labor Laws, Prompt custom clearance. A Special Economic Zone (SEZ) is defined as a specially delineated duty free enclave for trade operations. This area is reckoned as a foreign territory for the purpose of duties and tariffs.

Experience of India

Cash Incentives on Exports ranging from 4% to 20%

Payment Terms: Payment realization allowed till 180 days. Further Extension of 180 days based on genuine reasons also allowed. Shipments on CAD (Cash Against Document) basis also allowed

Experience of India

Abolishing of Inspector’s rule. Everything Voluntary.

Customs clearance on priority: Electronic Data Interchange (EDI) to fasten the operations

Availability of working capital at LIBOR +1%. Pre shipment credit up to 75% of the order value available from Bank.

Experience of India

Concept of Deemed Export Concept of Merchant Exports. Concept of Clusters Like Ludhiana, Tirupur, Coimbatore,

Panipat, Noida, Erode, Salem & propelled by strong associations.

Concept of Apparel Parks: The apparel parks operate as Special Purpose Vehicle and are run independently by entrepreneurs.

With countries like Sri Lanka, Singapore, South Africa, Bangladesh, Thailand and China etc a series of special trade agreements have been signed which is resulting in rapid growth of Indian exports.

Experience of India

Technology Up gradation Fund Scheme (TUFS); The industry is being modernized via an exclusive scheme, which has set aside $5bn for investment in improvisation of machinery. Eligible firms can receive loans for upgrading their technology at interest rates that are 5 percentage points lower than the normal lending rates of specified financial institutions in India. This interest rate incentive is intended to bring the cost of capital in India closer to international costs.

Experience of India

GSP issuance by Chamber of Commerce

No Tax on Property. Only personal property is Taxed

Cotton price is fixed for the quantity booked.

Recommendations for Uzbekistan


Customs clearance needs to be swift. On line systems to speed up the things

Cumbersome export documentation needs to be simplified. Contract registration in banks & customs should not be there to start with.


Property Tax needs to be abolished: 3.5% tax discourages Investments for modernization & capacity enhancements

Turnover Tax needs to be abolished: 3.2% tax act as a dampener for Exports promotion

Deemed Exports should be considered as exports & all export benefits like no turnover tax should be levied


Merchant export should be allowed. It means abolishing the levying of VAT and other taxes on the export of goods and services by intermediary companies and provide them with the same privileges that producer-exporters enjoy.

GSP should be issued by Independent, Non Government organizations.


Cotton price should be fixed for the booked quantity on the day of 15% pre payment.

Working capital & Pre Shipment Credit should be available for exporters


More incentives needs to be given as logistic costs are very high and present incentives are not sufficient to cover high logistic cost

For inputs, VAT on cotton should not be charged as procedure for refund is too long. Working capital requirement goes up by 20%.

Recommendations for Uzbekistan• Uzbek producers have to compete with

countries that enjoy favorable trade agreements with duty-free or low-duty export of their goods to the largest markets of Europe and USA.

• For Uzbekistan’s exports to such markets, duties constitute 14-18% of the amount of contracts. Cotton yarn, fabrics, ready-made garments and knit-wear exported by Uzbekistan to the EU, for example, suffer from customs duty at 4.2%, 8.4%, 9.6% of the total cost, respectively. On the other hand, imports from some countries, such as Turkey, Syria, Egypt and Nigeria are free of duty.

Recommendations for Uzbekistan• The banking system needs to be more friendly. The rule of 100% prepayment & L/C at sight

should be re looked. This payment method prohibits prospective importers since it requires them to tap into their liquid funds for a certain period of time.

Furthermore, this instrument of monetary control, entail delays and additional costs to exports.


• Payment realization limit should be raised to 180 days. It should be extendable on the basis of genuine reasons for further 180 days.

• This restrictive financial environment is also one of the reasons for slowing FDI into Uzbekistan

Recommendations for Uzbekistan In order to enhance the involvement of

the private sector in export operations, an Export-Import Bank for Uzbekistan may be created which can act as a catalyst to banking services which could provide export crediting and insurance of export loans

THANK YOU

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