Agra: India’s garment industry is losing out to Bangladesh due to rising input costs, especially on labour and tax incentives, a minister has said.
Bangladesh Commerce Minister Gulam Mohammad Quader said rising input costs in India and China — the two big players in ready-made garments business — offered a good opportunity for his country to expand its ready-made garments business.
“India is shifting away from the ready-made garments business. There has not been any significant investment in India in the ready-made garments industry in the recent years,” Quader, who was in India to attend the Partnership Summit in Agra, told IANS in an interview here.
He said rising wages and other input costs would make the ready-made garments business uncompetitive in India and China.
“This will be a big opportunity for Bangladesh to develop its ready-made garments business. We are already benefiting from it,” he said.
The garment industry has become the mainstay of the Bangladesh economy, accounting for more than 80 per cent of the country’s exports. Bangladesh’s exports in 2012 were $24.3 billion (Dh89 billion), of which garments contributed $19 billion.
Quader said availability of cheap labour was the main reason for the sharp increase in ready-made garments business in Bangladesh in recent years.
He said many Chinese companies have shifted their production facilities to Bangladesh to take advantage of cheap labour.
Tax incentives
“Many Chinese companies are opening production facilities in Bangladesh. Even for their domestic use, they are supplying garments from our country. I hope the Indian companies will also do the same,” Quader said.
“Wages have been going up in India. Other costs are also going up with rising living standards,” he said.
Apart from cheap labour, Bangladesh’s ready-made garments industry also benefits from tax incentives on exports, especially to European countries.
Bangladesh, which is categorised as a least developed country (LDC), enjoys duty-free access to European markets, while Indian firms have to pay 9.6 per cent duty.
Labour costs in Bangladesh are almost one-third of those in India. The average monthly labour cost in India is over Rs7,000 per person, while it is just around Rs2,500 in Bangladesh.
Due to duty concessions and low labour and other costs, garments produced in Bangladesh become 15-20 per cent cheaper than those in India.
This is a big threat to the $55 billion Indian textiles industry, which provides direct employment to over 35 million people, the second largest after agriculture, and contributes to nearly four per cent of the country’s gross domestic product (GDP) and 12 per cent to the total export earnings.
Quader said comparative advantage in the garments sector would help reduce Bangladesh’s trade deficit with India.
Trade gap
Merchandise trade between India and Bangladesh was $5.51 billion in 2012, out of which India’s export was $4.94 billion and import was $0.57 billion, according to India’s commerce and industry ministry data.
Quader said although Bangladesh was keen to reduce the trade gap, there was no reason to be concerned.
“Our imports have increased. Some people take it in a negative sense because balance of trade is heavily in favour of India. But these are the products that we need. If we don’t buy these from India we will have to buy them from some other countries at higher prices,” he said.
Quader said India-Bangladesh economic and political relations have strengthened in the recent years. He said $1 billion soft loan offered by India would help develop infrastructure in Bangladesh, especially rail and road networks.
