(A) CHALLENGES FACED:

Imminent World Recession

Apart from the chronicle problems that the Indian garment export industry has been
suffering from, and things like increase in duty draw- back, reduction of interest rates,
updation of the archived labour laws, erratic supply of power and lack of development of
infrastructure are posing great challenges.
The Government had been of the view that any shortfall in garment exports could be made
up by the domestic demand, which is huge. The experience of garment exporter is quite at
variance from this. They point out that even retailers' schemes and prolonged discount
season sales failed to attract consumers during the festive season.
At the moment, increased inventories and debt pressure continue to hamper the growth of
domestic retail sector, which has always been treated as a backbone support for the
exporters to fall back upon as a cushion to reduced exports

BANGLADESH
Yet another factor, which has serious ramifications both for domestic garment
manufacturers and exporters is the political decision to allow Bangladesh garment, duty-
free entry into India. Given the advantage of one of the lowest labour costs, Bangladesh
has been in serious competition with Indian garment exporters. Now with the advantage of
duty-free entry into Indian market should lead to a strong and unhealthy competition with
domestic garment producers. Even the confidence of garment exporters falling back on
domestic consumption on account shrinking and increasingly competitive global garment
market shall stand undermined.

Restricted Government Role

Unfortunately, there does not seem to be clarity on the Government, more precisely RBI
on its role when the Indian currency is being subjected to violent fluctuations, particularly
when it is consistently appreciating, which further pushes up our import bill. Earlier, RBI
did intervene in the currency market by pushing in more dollars so as to keep its
relationship with Indian rupee within acceptable limits. But that is not the situation now.
When Indian rupee continued to appreciate heavily and consistently, everybody expected
RBI to intervene, but it did not. There was a reason for that. Indian forex reserves are not
large enough to permit RBI to pump dollars in the current situation. The RBI has therefore
avoided intervention, leaving Indian trade and industry to fend for itself.

FLUCTUATIONS IN FOREIGN CURRENCY
Perhaps, the most damaging factor is the high volatility of Indian currency. The weak rupee,
on the other hand, is hurting the manufacturing sector. Government should ensure that high
volatility in exchange rate is curbed and rupee moves freely within a narrow band.

Exports Demand Sluggish:
India Ratings expects garment exporters revenues to remain
subdued on the back of the persistent economic slowdown in key export destinations of US
and Europe and continuous deterioration .However, to offset the impact, other Indian
exporters are diversifying into other geographies. Selling prices are likely to remain lower
depending on companies bargaining power which is very low .

B) VARIOUS INCENTIVES PROVIDED BY THE GOVERNMENT:

2% Interest Subvention Scheme on rupee export credit is available to certain
specific export sectors including readymade Garments .In addition Small and Medium
Enterprises (SME) in all sectors enjoy this benefit. The impacted markets especially
in Europe and Americas and the resultant weak demand have adversely impacted
performance of our exports Chairman AEPC also commented that, I am grateful to
Textiles Minister for the decision has been taken to grant incentive on incremental
exports
SPECIAL FOCUS MARKET SCHEME
Under FMS Duty Credit of 2 per cent is given on the FoB value of exports while under
the Duty Credit is 4 per cent.
Further, the scripts issued under different schemes namely FPS, FMS, VKGUY, SHIS,
MLFPS, SFIS, AIIS, for import of goods, will now be permitted to be utilised for
payment of Excise Duty for domestic procurement, to encourage manufacturing, value
addition and employment.
ZERO EXCISE DUTY ROUTE
Zero excise duty route is also available to the company.. The zero excise duty
route will now be available in addition to the
CENVAT ROUTE
CENVAT route under which manufacturers can pay excise duty on the final
product and avail of credit of duty paid on inputs.