If one would remember rightly, in 2018-19 fiscal, Bangladesh’s exports to India, which is a non-traditional export destination, for the first time reached billion-dollar mark, with goods worth US $1.25 billion sold to the neighbouring country.
According to Bangladesh’s Export Promotion Bureau (EPB) data, Bangladesh’s exports to India stood at US $1.25 billion, up by 42.91 per cent from what was US $873.27 million in the previous fiscal even as of the total amount, apparel sector raked inUS $499.09 million in 2018-19 fiscal, which was 79.09 per cent higher compared to that of US $278.67 million in the previous year while knitwear products accounted for US $369.43 million and woven items US $129.66 million.
It may be mentioned here that though India is one of the most potential markets for ‘Made in Bangladesh’ apparels for sure, as far as non-traditional markets are concerned, and the reason for the same are many, of which ease of non-trade barriers, incentives for non-traditional markets, production cost rise due to implementation of Goods and Services Tax (GST) in India and large scale presence of global retailers in India have been attributed to the sharp rise of apparel exports even if duty-free market access also played a major role in this regard.
“Bangladesh offers apparel goods at reasonable prices, while global retailers are opening more outlets in India, who buy products from here. Production costs in India increased due to implementation of the Goods and Services Tax (GST) in India,” explained earlier Shahidullah Azim, the current Vice-President of the BGMEA and the Managing Director of Classic Group, who went on to underline, as a result, demands for Bangladeshi goods increased in India, which pushed up the exports.
Besides, transportation cost from Bangladesh is low, which encouraged importers to buy goods for both local brands as well as foreign brands, further added Shahidullah Azim even as many economists noted exports to India has been on rise as the non-tariff barriers were eased, while cash incentives also played its part.
“India is a growing market for Bangladesh, where non-tariff barriers were hindering exports to the neighbouring country. In recent times, these barriers are relaxed to some extent,” opined World Bank Lead Economist in Bangladesh Zahid Hussain, who added, in addition, exporters enjoy cash incentives in exporting apparels to a non-traditional export market, which was another big reason for the sharp rise in export earnings even as it may be mentioned here that Bangladesh Government offers 4 per cent cash incentives against export of apparel goods to non-traditional export destinations.
“As a friend of Bangladesh, India has also given duty-free market access to all Bangladeshi goods except alcohol and tobacco. This has given opportunities to Bangladeshi exporters to attain a leap in export earnings,” stated former Commerce Minister Tofail Ahmed earlier, adding, “During my tenure, I increased cash incentives from 3 per cent to 4 per cent to increase performance to non-traditional export destinations.”
However, this encouraging trend of India especially in case of apparel shipments, took a hit after the breakout of the COVID-19. As countries went for lockdowns and shut borders resulting in supply chain disruptions and brands and retailers downed shutters amidst dwindling consumer spending on apparels, export of readymade garments to India also fell.
However, with Coronavirus virus showing signs of losing its sting of late, especially in the subcontinent even as vaccinations drives against the virus continue unabated in India, apparel shipment and exports in general from Bangladesh to India started picking up again so much so that Bangladesh’s exports to India increased by 65 per cent to US $700 million year-on-year in the first four months of the current 2021-22 fiscal year, thereby catapulting India amongst the top six export destinations of Bangladesh and, if the growth continues at the current pace, Bangladesh’s export income from the largest economy in the South Asia region (India) seems all set to cross the US $2 billion mark for the first time this year.
And this is as per experts and people in know of things even as exporters are expecting high growth in the coming days as the economies in India along with other export destinations are making a turnaround overcoming pandemic shocks even as EPB Vice Chairman AHM Ahsan underlined exports of major products to the major markets have increased in recent months, thanks to improvement in the pandemic situation.
Hopefully, this trend will continue in the future, claimed AHM Ahsan even as President of the Bangladesh-India Chamber of Commerce and Industries, Abul Matlub Ahmad, on his part said Bangladesh’s exports to India would touch the US $2 billion milestone in the current financial year if the current trend of growth continues even as he mentioned India is one of the largest importers in the world and Bangladeshi exporters are benefiting from the export of various new products including the much-sought after ‘Made in Bangladesh’ apparel items.
The President of the Bangladesh-India Chamber of Commerce and Industries further underlined Bangladeshi exporters were focusing on India outside the conventional markets, including the United States and the European Union, to take advantage of India’s duty-free access facility to all but 25 products.
Lower shipping charges is another major reason for the increase in exports to India, claimed Abul Matlub Ahmad, adding, “Shipping charges have tripled internationally due to the pandemic. As Bangladesh has a land border with India, Indian importers are being encouraged to import from Bangladesh to reduce this extra cost. Due to this, exports to India are growing at higher rates than to other countries.”
It may be mentioned here that earlier in 2019, Bangladesh Commerce Minister Tipu Munshi had also said India can account for more than US $ 2 billion in Bangladesh’s apparel export in two years.
“Apparel export to India rose significantly in the last two years and we have the capability to export more,” maintained Tipu Munshi earlier while speaking at a press briefing even as he expressed hope that apparel shipments to India will cross the US $ 2 billion-mark over the next couple of years while forecasts then suggested fashion retail market in India is expected to reach US $ 115 billion by 2026, growing at a promising CAGR of 9.7 per cent.
“In the past, India had different taxing policies across its states. This used to create trade barriers for us. Now, they have imposed a uniform taxing policy which is aiding the business. Also, international brands and stores are opening up in India, which demand more apparel products from Bangladesh,” stated then Vice-President (Finance) of BGMEA Mohammed Nasir, while speaking to Apparel Resources earlier while underlining that the neighbouring economy (India) is seeing a strong growth of the middle-income segment; a group that has more purchasing capacity.
Meanwhile, as per data of the EPB, the 64.7 per cent growth in the Bangladesh’s exports to India – with which Bangladesh has an annual trade deficit to the tune of US $ 5 billion – during the July-October period was the highest when compared to growth in export income from other markets in the list of top 20 export destinations even as Bangladesh’s exports to India against its total exports were 3.31 per cent during the July-October period of last fiscal year, while the figure has increased to 4.44 per cent during the corresponding period this year.
At the time of writing this article, EPB was yet come out with product-wise export data for October even if an analysis of the export data to India for three months till September shows that the high export growth there was mainly driven by an increase in exports of woven and knitwear, apart from leather and leather products, cotton and cotton products and jute and jute products, etc., even if data from the BGMEA underlined Bangladesh’s woven garment export to India in July-October of 2020-21 was US $ 85.68 million which increased to US $ 138.47 million in the July-October period of 2021-22 marking 61.61 per cent growth while knit was US $ 67.99 million in July-October of 2020-21, which became US $ 116.33 million in July-October period of 2021-22 , marking 71.10 per cent growth.
So, even as apparel export growth to India continues, the Indian High Commissioner to Bangladesh Vikram Kumar Doraiswami recently maintained logistical constraint was the biggest barrier to expanding trade between Bangladesh and India, even as he added that both the countries conduct most of the bilateral trade through one point, the Benapole-Petrapole border, and this essentially creates some vested interests.
“As a result, the cost of trade remains high,” Doraiswami said at a discussion on 50 years of Bangladesh-India Partnership: Towards a Journey in Next 50 Years, organised jointly by Bangladesh’s Centre for Policy Dialogue and New Delhi-based Research and Information System for Developing Countries in Dhaka, while adding, “There is a clear necessity to look at the trade relationship in a way that benefits both countries, but for that to happen, we need to look at what the critical issues are. There are fundamental problems in business discourse,”he said even as various other experts also stated Bangladesh’s exports to India could be much higher if the country’s infrastructure is improved, local businesses diversify their products, and a well-functioning standardisation system is put in place.
Doraiswami further went on to say that India wants more border checkpoints to be functional and is ready to help in this regard through grant-based projects even as he suggested increasing the use of railways for trade as it is a very cost-effective mode of transportation.
“We should act fast to improve the logistics for land, rail and river ways. We are more than ready to spend money on grant-based projects to develop inland container depots and other related infrastructure to make trade easy and cost-efficient,”reportedly underlined Doraiswami even as businesses in Chittagong earlier called upon India to cut the non-tariff barriers to boost Bangladesh’s exports to the neighbouring country and reduce the trade gap while also demanding enhancement of port infrastructure of both the countries to facilitate the movement of goods.
Going by the views as expressed by the stakeholders, crossing US $ 2 billion in exports to India not only seems very much on the horizon unless any unfortunate development takes place, further improvement of infrastructure and logistics in both the countries, as underlined by many of the experts, could also take Bangladesh’s exports far beyond the US 2-billion mark, which does not seem an impossibility either, to say the least!
