Is Bangladesh's Textile Industry Threat to India?

India's textile industry is one of the oldest industries of the Indian economy. But somehow Bangladesh’s textile industry surpassed India’s Textile industry in terms of exports.
Is Bangladesh's Textile Industry Threat to India?

History of India and Bangladesh Textile Industry:

India's textile industry is one of the oldest industries of the Indian economy. The textile and apparel industry ranks second across the country in terms of providing employment. Also, with total exports of US$ 44.4 billion in FY22, India is the world's second-largest textile and garment exporter. But somehow Bangladesh’s textile industry surpassed India’s Textile industry in terms of exports. According to FICCI, Bangladesh's annual textile and garment exports to the US have increased by 11.5 percent over the last five years, while India's exports have increased by 4.2 percent over the same period.

Bangladesh is overtaking India especially when it comes to textile and trade; India contributes only 3% of world trade whereas Bangladesh contributes double in number i.e. 6%. India was the largest exporter of cotton for centuries but after the invasion of the Britishers our indigenous textile industry was broken in such a way that India was unable to continue its growth and Bangladesh’s industry was equally affected.

How MFA Changed The Textile Game Of Bangladesh?

Bangladesh aroused from this situation when The Multi-Fiber Arrangement came into the picture in 1974. The agreement set some limits or quotas on the amount of clothing and textile that any developing countries could export to developed countries. This agreement was not imposed on Bangladesh as it got the status of a separate country in 1971. As it was a new country and was not counted as a developing country, rather it was considered a poor country. However, at the beginning of 1980, Bangladesh's garment industry evolved into its primary export sector, and in 1981, the export was worth 3.5 million US Dollars and became a significant source of foreign cash, with exports of $5 billion in 2002 and 2007, the exports were worth $ 10.7 billion, the growth was enormous. 

Even after the abolishment of the Agreement on Textiles and Clothing (ATC) in 1995, Bangladesh had a continued advantage over other developing countries like India, and China. Bangladesh's advantage stems from the United States designation of it as the least developing nation. This label provided tons of opportunities and preferences in terms of trade and the use of trade to grow their economies and combat poverty. They are exempted from paying duties and taxes on their exports, because of which the exports become cheaper and encourage developed nations to purchase more apparel at lower prices. This is the reason why leading fast fashion brands like H&M, Zara, and Levi’s preferred to make their clothes in Bangladesh.

Current State Of Industry and Major Factors:

According to data released by the Export Promotion Bureau (EPB), Bangladesh's readymade garment exports increased by 10.27% to US $ 46.991 billion during fiscal 2022–23 compared to exports of $ 42.613 billion in FY 2021–22, leaving India behind with apparel exports that increased by only 1.1% to US $ 16.20 billion in 2022–23 from US $16.02 billion in 2021–22. The first factor making Bangladesh’s textile industry grow in such a massive way in comparison to India is cost. Secondly, rigid rules make it difficult to operate. As a result, the average turnaround time for Indian enterprises from order to delivery is 63 days. In Bangladesh, the turnaround time is much shorter, at 50 days. A delivery might also reach a port in Bangladesh in one day. In India, it might take up to ten days for a shipment to arrive at a port. Thirdly, Bangladesh's small geographical size compared to India makes it easier to reach ports. Dhaka – the Capital of the state also has a port, facilitating quick and easy exports. In addition, the production cost for making one garment in India is 56 times more than that of Bangladesh and the cost of electricity, logistics, and other industrial variables in India is relatively high. Also, Bangladesh further benefits from economies of scale.

Labor is one of the main production elements for manufacturing, and it is extremely expensive in India. The average pay in Bangladesh is 5000 rupees, which is nearly half the wage in India, making labor more affordable.  The majority of the laborers engaged in Bangladesh’s textile industry are women, approximately 80 percent or more labors of Bangladesh’s textile industry are women, leading to the empowerment of women and such inclusion of women led to immense change in the economy.

All these factors are contributing to a threat to the Indian textile industry.  According to the recent report from the Apparel Export Promotion Council (AEPC), the increase in Bangladeshi apparel imports severs as a threat to India's textile and apparel/clothing/RTW (T&A) sector. The council has urged the government and authorities to adopt a few measures so that exports can be boosted the result of which the entire clothing industry can be lifted making it more competitive. The Indian government may follow in Bangladesh's footsteps and simply discover and capitalize on an edge the way they did it.

Relation and Future:

In the long run, the government's emphasis on enhancing competitiveness and quality, as well as offering incentives to textile makers and reducing regulations, is projected to boost the sector. However, Indian textile industry has an edge over that of Bangladesh’s clothing industry as the product quality is very high and better in comparison. Further India can increase the partition of women in such industries so that proper utilization of the population can be done. Also, the government has sanctioned the establishment of seven Pradhan Mantri Mega Integrated Textile Regions and Apparel Parks over five years.  The government has recently authorized the Textile Production Linked Incentive Scheme.

The growing trade ties between Bangladesh and India can turn this threat into an opportunity. In the global textile and clothing supply chain, both nations frequently play complementary roles. While Bangladesh is recognized for its efficiency in making basic and low-cost clothes, India has a more varied textile sector, producing a wide range of fabrics, yarns, technical-textile, and high-value-added garments.  Based on their various capabilities, both countries may coexist and cater to distinct market niches. Though Bangladesh's textile industry has grown significantly and competes with some parts of the nation's textile industry, it is not necessarily a significant threat overall.