As per World Trade Organisation (WTO) rules the Centre has decided to phase out direct subsidies scheme facilities for textile exporters by December 2018. WTO rules do not permit least developed and developing countries to give benefits to its exporters when a sector achieves 3.25 per cent share in global exports.
In the case of textile industry in India, it had crossed the above mentioned threshold in 2010 itself. At present, India has 5 per cent share in global textile and garment trade. The WTO rules state subsidy offered to that particular sector has to be weaned off within eight years.
If any objection is filed by members for the delay in fitting into WTO ruling within the said deadline, the country which fails to comply with norms are provided more time to introduce required changes in the rules.
India has also been facing pressure from the US to introduce new norms under its textile policy. The US claims all forms of export subsidies offered for the sector should have been abolished by 2015 as India had reached “export competitiveness” in textile and clothing no later than 2007. However, exporters need not be worried as the commerce ministry is mulling rolling out other policies considering the WTO rules such as ones for quality upgradation and subsidising capital expenditure.
The government has also assured these changes will be take effect gradually so popular schemes like Interest Subvention or Merchandise Export from India Scheme will not be removed immediately. Moreover, policies and schemes equivalent to the ones being phased out will be put in place.
