Bangladesh's growing RMG exports to India: A way to reduce bilateral trade deficits

Anup Sinha

(sinhaanup1990@gmail.com)

India is the world's second-most populous country, behind China, and its gross domestic product (GDP) is expected to expand at a rate of 9.2% this fiscal. India with its huge middle-class population is now enjoying enhanced buying power and for them, Bangladesh is emerging as a highly attractive market in terms of RMG merchandizes. This has resulted in local and international brands and merchants expanding their horizons outside the metropolises to take advantage of the prospects available in smaller locations and grow their sourcing volumes from Bangladesh.

Bangladesh is already a very profitable supplier of formal shirts, tops, denim trousers, underwear, polo shirts, T-shirts, and bottoms for both men and women in India's middle class. According to figures from the Export Promotion Bureau, Bangladesh delivered garment products worth $365.95 million from July to December of this fiscal year, increasing 58.07 per cent from $231.53 million in the same time last year.

Key factors behind this growth

Firstly, the growing middle-income groups in India are driving increased demand for Bangladeshi garments. Because they can't afford pricey Indian high-end garments, many people choose Bangladeshi-made garments. Many western clothing merchandizes and brands operate in stores in India, and they import garments from Bangladesh to sell in the Indian market. Furthermore, to service the RMG industry, local apparel retailers and brands have popped up. They also purchase clothes from Bangladesh. Some Indian clothing exporters also re-export Bangladeshi clothing to other nations. Many garment importers in Dubai make orders with Indian manufacturers, who then purchase items from Bangladesh since the cost of production is lower there than in India.

For instance, Classic Fashion Concept Ltd., a Bangladeshi apparel manufacturer, uses Indian exporters to transfer over $3 million worth of garments to a Dubai-based firm. Md Shahidullah Azim, the company's managing director, claims that a large number of Indian business people are making orders in Bangladesh for re-export to other nations. Another leading apparel manufacturer in Bangladesh is Ananta Group. According to Ananta Group's Managing Director Sharif Zahir, the company sells $10 million worth of garments in India each year, mostly denim, women undergarments, woven shirts, and knitted goods.

Secondly, another significant factor is the duty-free entrance of Bangladeshi goods into the Indian market. In 2006, India permitted duty-free imports of Bangladeshi garments under the SAFTA (South Asian Free Trade Area) agreement. Previously, this facility was limited to 8 million pieces each year, but that restriction was lifted in 2010, and imports from Bangladesh have been steadily increasing since then.

SAFTA is the South Asian Association for Regional Cooperation's (SAARC) free trade agreement, which took effect in 2006 and replaced the 1993 SAARC Preferential Trading Arrangement, including Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka as signatories.

And finally, geographical closeness and increased connectivity also aided in the growth of RMG exports from Bangladesh. The inexpensive cost of transportation from Bangladesh encouraged importers to acquire items for both local and global brands. Besides, exports from Bangladesh are expected to reach new highs in the coming days, as bilateral connectivity between the two nations is constantly improving due to a series of efforts made by the respective governments.

Perspectives for the future

Bangladesh's exports to Indian markets are likely to surpass $2 billion for the first time by the conclusion of this fiscal year, as demand for Bangladeshi goods grows in the neighbouring nation. The Bangladesh Garment Manufacturers and Exporters Association's (BGMEA) president, Faruque Hassan, predicts that garment exports to India would increase shortly. In June of 2022, a large number of BGMEA members will attend a clothing trade event in Bangalore. The fair will include Bangladesh, Myanmar, and Vietnam. In April, the BGMEA will send a business team to India to examine commercial and investment opportunities in Bangladesh.

Bangladesh's RMG exporters' ability to recover so quickly from the drawbacks of the corona pandemic is a testament to their perseverance, resilience, and innovation. These attributes will become increasingly important in the coming years as the RMG industry tries to adapt and develop in response to changing customer needs and most importantly help in bridging the trade deficit with neighbouring India.