Indian garment exporters are exploring opportunities in Iran, although the United States and the European Union are important markets for them, they are exploring new markets for textiles exports in an attempt to reduce their dependence on these two regions for growth, said Rashmi Verma, Secretary, Ministry of Textiles, on the sidelines of an event in Mumbai.

A delegation led by the Ministry of Commerce and accompanied by over half a dozen industry officials recently met with their counterparts there. The Indian delegation discussed a host of issues including prevailing taxes and relaxation in policy support for hassle-free export of textiles to Iran.

India has remained absent from Iran’s markets not because of preferential treatment like European Union, but on account of extremely high import tax levied by the Iranian government. An import tax of 200% was levied on apparels and textiles until two years ago which has been gradually slashed to 55% and 32%, respectively.

Following the Indian delegation’s visit, however, tax authorities in Iran have agreed to reduce import duty on textiles and apparels to a 20-25% level or even lower over the next two years.

Exploring new markets has become critical for Indian textiles exporters due to falling shipments to traditional markets such as the United States and the European Union, which account for over 60% of India’s textiles and apparel exports.

Owing to preferential treatment given to the countries like Pakistan, Vietnam and Bangladesh, textiles shipped to such buyers works out to be uncompetitive for Indian exporters. Consequently, India’s exports have declined over the last few years.

After setting a target of $47.5 billion at the start of the fiscal year ending March 2016, India’s textiles exports managed only $38 billion, a marginal decline from $40 billion in the previous year. With a host of incentives and a Rs 6,000 crore package announced in the last few months to boost textiles and apparel exports, the government has set a target of $50 billion for FY2017.

Rahul Mehta, President, Clothing Manufacturers Association of India (CMAI) said that the targets look achievable confirming India’s outreaching Iran, who’s market size stands at $16 billion, of which only 40 percent comes from domestic sources. The rest is met through imports, largely illegal.

Iran offers immense of opportunities for textiles and apparels exports for India being the Islamic country a gateway for European markets with a combination of western and traditional taste, said Mehta.

Texprocil chairman R K Dalmia referring to an Ernst and Younf report forecasts India’s textiles exports to rise by 9 percent CAGR (compounded annual growth rate) to $62 billion in five years from $40 billion in 2016. The domestic textiles market is set to grow 5.2% annually to $80 billion by 2021 from $62 billion in 2016.

Moreover with, China’s market share in the world’s textiles and apparel segment declining to 38% from 40% from a couple of years ago due to rising cost of production on higher labour cost. A vacuum is created by China, which India can exploit to increase its market share from the existing 5 percent.