The Import Impact

The imposition of GST has led to a rise in textile imports. What does this mean for the domestic apparel market? Samir Alam reports.

- Samir Alam

The aftermath of demonetisation was beginning to fade in 2017 and players in the Indian textile industry had begun gearing up for recovery. However, as the Goods and Services Tax (GST) came into effect from July, their hopes were sadly demolished. In the months following demonetisation, production activities had already experienced a slow down, but there was hope that by January, things would normalise. As trade began to rise as per expectations, the early news regarding GST once again began to raise red flags. The textile industry is notoriously well known for being extremely fragmented and reliant on cash liquidity.

The news of the new tax system coming into effect months after demonetisation caused many traders to worry. As a result, many traders became unwilling to hold on to any inventory and this immediately disrupted the industry’s overall production cycle. As retail traders began to clear their inventory, by offering special discount sales before the GST could come into effect, the manufacturing side of the business straggled behind, with a stalled production market and low domestic demand. Many in the industry have attributed the problematic implementation of the GST as impacting textile production to the tune of up to four per cent. However, the more worrying trend has been the impact it has had on international business relations, as the amount of Indian imports in textile have increased dramatically, flooding domestic markets with goods from competing nations.

GOOD NEWS, BAD NEWS