Although India is the world’s third-largest exporter of silk, exports from the sector have been on a continuous decline for quite some time now. In an exclusive interaction with The Dollar Business, Satish Gupta, Chairman, Indian Silk Export Promotion Council (ISEPC), discusses the reasons behind the fall and suggests initiatives to help boost exports of silk and silk products from the country.
Interview by Anishaa Kumar | December 2017 Issue | The Dollar Business
TDB: How has silk exports from India evolved over the last few years? Which product categories do you think have the highest potential for growth?
Satish Gupta (SG): Export of silk and silk products from India has witnessed various radical changes, especially over the past few years. With the rise in the cost of raw material, currently, international buyers are mostly looking for two categories of products – high-fashion exclusive garments and low-cost fashion accessories such as scarves, shawls, etc.
TDB: As per Silk Board statistics, export earnings from silk have fallen from $323.57 million in FY2016 to $248.59 million in FY2017. What are the reasons for this steep decline?
SG: There has been a continuous decline in exports of silk and silk products from India. There are many reasons for the decline, but the two biggest hurdles to exports, as of now, are the rising cost of raw material and a strong domestic demand. Though India is the world’s second-largest producer of silk, it is also one of the major consumers of the product. Unfortunately, despite improved quality and increased production, we have not been able to stem the decline in exports.
TDB: Silk producers have raised concerns about the impact of mulberry silk import from China on their business. What’s driving its import from China? Why is Indian textile industry not procuring it from domestic market?
SG: Import of mulberry silk from China has been on the rise because our domestic consumption is much more than our production. Indian textile industry has a huge demand for low-cost silk and is naturally turning to source it from China. For the purpose of exports, textile manufacturers rely on domestic silk producers who fulfil their demand for high-quality silk required for making exclusive fashion-oriented garments.
TDB: What assistance does the Council provide to its members?
SG: The Indian Silk Export Promotion Council provides market feedback to exporters as well as gives suggestions to the government to boost exports from the sector. The Council also helps its members in showcasing their products to overseas buyers by organising exclusive trade fairs, both in India and abroad.
TDB: Is the sector happy with the incentives it receives? What more can the government do to boost export of silk and silk products from the country?
SG: It is unfortunate that the support to this sector is being gradually withdrawn and that too at a time when it is most needed. Silk was given the highest weightage in the erstwhile Focus Products Scheme with a view to boost its competitiveness in the international markets, but the reward under Merchandise Exports from India Scheme (MEIS) has been brought down to a mere 2%. The MEIS rate for silk should be raised to 5%, which is equal to that for other sectors like handloom, carpets, handicrafts etc. Silk is not recognised as a priority sector in FTP 2015-2020 and as such exporters of silk and silk products do not receive the benefits that other priority sectors can avail. If the government includes the sector in the priority list, it will give a boost to our efforts to increase exports of silk and silk products.
TDB: Are there GST-related concerns that continue to bother the silk sector?
SG: As far as the sector is concerned, many issues persist. The sector is hoping that the government will consider the removal of the compulsory requirement of Letter of Undertaking or bond for exports without paying taxes, provide GST exemption to merchant exporters, simplify the refund process and announce a uniform rate for job work.
TDB: You participated in Textiles India 2017, recently held in Gujarat. How do such events help exporters?
SG: The idea of organising Textiles India was brilliant and was intended to showcase the strength of our textile sector to overseas buyers. Participants gained valuable experience and knowledge from the show. Events like these help showcase India as a valuable and reliable sourcing hub for importers, connect global buyers with sellers and help establish the Indian brand in the international marketplace.
TDB: Which are India’s largest export destinations? How can we further expand our presence in these markets?
SG: For Indian silk exporters, US and Europe are major markets. What makes these markets important for India is the lifestyle, economic background and high purchasing power of buyers in these markets. To further expand India’s presence in these markets and beyond, there is a need to build a strong brand image for Indian silk. This will help in increasing the unit value realisation and creating a USP for Indian silk and silk products and help us compete with other silk-producing nations.
TDB: When it comes to silk exports, India ranks third after China and Italy. What has been restricting our growth in the international market?
SG: There is a need to make silk exports lucrative by subsidising marketing initiatives and thereafter developing a unique and strong brand image. India can certainly overtake China, both in terms of production as well as in terms of exports, provided that the government lends full support to the industry on aspects such as marketing and brand building. The government can also help by investing in research and development to improve the quality and variety of our products.
TDB: The FY2018 Union Budget saw a 15% increase in allocation for the development of silk textiles. How has this helped increase silk exports?
SG: The problem with this allocation is that although the funds have been provided to the Textile Ministry, a major part of it will be spent by the Central Silk Board which is the custodian of the Indian silk industry. Funds will therefore be spent with the aim to help develop the domestic market whereas there is also a need to fund growth initiatives for exports to be able to sustain the momentum. Indian Silk Export Promotion Council (ISEPC), as the nodal agency for silk exports, must also get some funds to help boost exports from this sector.
TDB: What challenges does the Council face when it comes to promoting and marketing Indian silk and silk products in international markets?
SG: The only challenge with regards to the work of ISEPC, as mentioned earlier, is the paucity of funds. We receive funds only from the Department of Commerce, whereas a sizeable amount of funding should come from the Ministry of Textiles. While allocating funds to ISEPC the Department of Commerce takes only export performance into consideration. Here is where problem arises. As we are at present not performing too well, we end up getting the lowest share. The Ministry of Textiles in this scenario should come forward and take the call for funding various export-development projects of ISEPC. As mentioned earlier, we recommend that the government should declare silk sector as a priority sector for exports and provide the sector with the required support.
TDB: Are there any specific programmes that need to be expanded or introduced to assist the silk sector?
SG: Yes, there are many areas that we need to focus on to help the sector progress. When it comes to schemes, there is currently an urgent need for more efforts to be made for design development. There is also a need for setting up of a resource centre on export markets.
TDB: How do you see silk exports growing over the next five years?
SG: The way we see it, there is a huge potential to increase our exports. Many of our competitors are gradually withdrawing from this sector due to high labour costs. China is at present the only competitor but it is also in the process of withdrawing from the fray. India now has the opportunity to expand its presence across the globe!