India explores Iran textile market

An import levy of 55% restricts entry but the Iranian government is mulling reduction of the levy

To reduce their dependence for growth on the European Union (EU) and American markets, Indian garment exporters are exploring business opportunities with Iran.

A commerce ministry delegation, accompanied by half a dozen industry officials, recently went to Iran and discussed various issues in this regard

Owing to preferential treatment for Pakistan, Vietnam and Bangladesh, textiles shipments to America and the EU, the traditional buyers, is becoming uncompetitive for Indian exporters. Our exports in the segment have been falling for some years.

“We are exploring new markets, to reduce our dependence on these two regions,” said Rashmi Verma, secretary, ministry of textiles.

After setting a target of $47.5 billion at the start of the season, exports were no more than $38 billion for financial year 2015-16, from $40 billion the previous year. With a host of incentives and a Rs 6,000 crore package announced in the past few months to boost textile and apparel exports, the government has set a target of $50 billion for 2016-17.

“China’s market share in the world’s textile and apparel segment has declined to 38 per cent, from 40 per cent a couple of years ago, due to higher labour cost. India can exploit this, to increase its market share from the existing five per cent,” said Verma.

“The targets look achievable,” said Rahul Mehta, President, Clothing Manufacturers Association of India.

He noted the market in Iran was $16 billion, of which 40 per cent came from domestic sources. The rest was met through import. India has been absent from there, due to an extremely high import tax by the Iranian government. This was 200 per cent on apparel and textiles until two years earlier; now, this is 55 per cent and 32 per cent, respectively. After the Indian delegation’s visit, Iran has agreed to reduce these to 20-25 per cent or even less in two years.

“Iran offers immense of opportunities for our export, with a combination of western and traditional taste,” said Mehta.

America and the EU together take a little over 60 per cent of India’s textile and apparel export. R K Dalmia, head of the Cotton Textile Export Promotion Council, forecasts India’s textile export to rise at a compounded annual rate (CAGR) of nine per cent to $62 billion in five years, from $40 billion in 2016 (he quoted an Ernst & Young study). And, the domestic market is set to grow at a 5.2 per cent CAGR to $80 billion by 2021, from $62 billion in 2016.