India and Sri Lanka Sign Textiles Agreement

September 18, 2013 Posted by India Briefing Reading Time: 2 minutes

Both nations to target the Chinese consumer

Sept. 18 – The Indian and Sri Lankan Governments have signed a memorandum of understanding (MoU) in the textiles industry to take advantage of changes in China’s consumer behavior. Zohra Chaterji, Secretary of the Indian Ministry of Textiles said that “China’s textiles industry is gradually moving from production to consumption. Combining our strengths – Sri Lanka’s garment producing infrastructure and India’s quality fabric output – we could jointly compete for China’s textile market.”

The MoU comes after last year’s agreement allowing Sri Lanka to export up to 8 million pieces of apparel to India with zero duties. A 2011 survey by the Chinese National Garment Association (CNGA) showed that the labor costs, raw material costs and financing costs of China’s textiles and garment companies were rapidly increasing, and that the Chinese market shows great potential for foreign imports.

Worth an estimated US$540 billion, the Chinese textile sector represents 40 percent of the country’s annual industrial output. Textile and garment exports are worth roughly US$248 million annually, showing that the country is still largely agricultural in nature, despite its modern image.

The new MoU establishes a Joint Working Group chaired by the Secretary of the Ministry of Industry and Commerce and the Joint Secretary of the Ministry of Textiles, as well as private sector representatives, to assist in affective cooperation between the Indian and Sri Lankan textile industries.

“This historic MoU will expand business and co-operation in the development of SME in handloom, powerloom and textile sectors,” said Sri Lanka’s Minister of Commerce Anura Siriwardena.

The new MoU will remain in force for five years and may be renewed. Meanwhile, Indo-Lanka bilateral trade currently stands at some US$4 billion.

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