On 31 December 1994, India signed an Agreement on Textiles and Clothings with the USA and the EC.The binding took effect from 1st January 1995.Under the agreement, the MFA would be phased out by the next ten years.
In the first step towards implementation of the agreement, the government has decided to place cotton yarn, woolen yarn, polyester staple fibre and 20 other industrial fabrics under the OGL. These items would initially continue to attract 65% import duty as well as countervailing duty. However the tariffs are envisaged to progressively decline to 35%, and at the same time some other fabrics and made-ups would be removed from the restricted list of imports by 1998. The Government has also done away with the minimum floor prices for garment exports, giving greater flexibility to exporters.
Other gains to India are the quota enhancement on certain categories, and removal of the quota barrier on cotton made-ups in case of the USA, and handloom and cottage industry products in case of the EC.
Centre for Monitoring Indian Economy, Bombay
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Last updated: May 1995.