China’s recent decision to cut export subsidies on 2,831 products is good news for Indian exporters, especially in one industry. Indian textile companies have been busy sending out warnings of how the sharp rise in the rupee is making exports unprofitable. The textiles industry directly employs more than 33 million workers, the most by a single sector after agriculture. So, such warnings need to be taken seriously, even though it is likely that the covert aim is also to get a few sops from the government. When the restrictive and quota-based multifibre agreement (MFA) was phased out at the end of 2005, and the global trade in textiles was opened up, it was widely assumed that India and China would be the major beneficiaries.
This forecast has proved to be half-true. China’s textile exports soared while India’s limped along. Now, a cut in China’s export subsidies could give the Indian textiles industry a rare second chance.