In 2019,Bangladesh’s exports to India for the first time crossed the US $ 1 billion mark, thanks to rising shipment of ‘Made in Bangladesh’ apparels.
Experts attributed this to a variety of reasons.
“Bangladesh offers apparels at reasonable prices, while global retailers are opening more outlets in India, who buy products from here…,” stated Vice-President of BGMEA Shahidullah Azim then even if World Bank Lead Economist in Bangladesh Zahid Hussain on his part maintained the non-trade barriers have been relaxed to some extent lately, contributing exports from Bangladesh to India to reach new heights.
Two years down the line, in a reversal of sorts,Bangladesh is now emerging as one of the fastest growing export destinations for India rather.
India’s exports to Bangladesh went up by 81 per cent between in April and October period of FY 2021-22 (India’s fiscal year, which starts on 1stApril), amounting to US $7.7 billion.
From being the ninth largest export destination two years ago, Bangladesh moved five notches ahead last year and, if the current trend continues, Bangladesh is but all set to cement its position as the fourth largest export destination for India by the end of FY ’22 (which ends on 31st March for India).
Factors behind the changing trend…
Bangladesh demonstrated exemplary economic success and growth in the past decades. In the Fiscal Year 2020-21, the Per Capita Income (PPI) in Bangladesh was recorded at US$ 2,554 even if the Gross Domestic Product (GDP) increased to US$ 409 billion.
As Bangladesh continued its economic growth journey unabated, it opened up new vistas for its neighbour India, with which it shares longstanding socio-economic ties, to export commodities/products that Bangladesh is not self-sufficient in even if according to reports, some of the major exports items from India last year included cereals, electricity and fuel, vehicle parts, machinery and mechanical appliances.
But, it is the Bangladesh’s growth engine, the readymade garment sector — the apparel industry is responsible for more than 80 per cent of Bangladesh’s export earnings — which helped most in boosting exports from India.
Of all the items, cotton was foremost in the list of products exported from India.
According to reports cotton exports from India to Bangladesh during the April-October 2021 period reached US $ 2.1 billion, marking year-on-year growth of 162 per cent while cotton yarn import has also been on the steady rise of late as well, thanks to Bangladesh’s apparel sector, which made a strong export turnaround in the pandemic-hit 2021.
Once accounting for more than 60 per cent of Bangladesh’s total cotton imports, India started losing its relevance in-between as spinners in Bangladesh cut down their dependence on a single source for this vital raw material. The result, in 2018, Bangladesh, the second largest importer of cotton in the world, met 37.06 per cent of its requirement for the white fibre from East and West African countries as India’s share fell to 26.12 per cent in Bangladesh’s total cotton imports.
2021, the game changer…
It was only till 2021, when pandemic-induced supply chain disruptions and subsequent increase in shipping cost led Bangladesh to fall back on India once again for its raw material requirements. And, once a major supplier of cotton yarns to Bangladesh, China lost some ground in this regard to India.
The reasons behind this are many.
“The recent surge in freight rates on the China-Bangladesh route directly hit our production and raised costs….,” observed Rakibul Alam Chowdhury, Vice-President of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
As per reports, the shipment costs for a 40-foot container on the Bangladesh-China route increased by around US $ 2,000 in a short span of time, which continues still even as importers are now forced to pay US $ 8,000 for a 40-foot loaded container which was just US $ 6,000 not so long ago while in last one year, import cost increased by around US $ 5,000 or 167 per cent in phases.
As per the data analysed by Team Apparel Resources from various sources, India exported US$ 1.72 billion worth of cotton yarn to Bangladesh in calendar year 2021 from that of US $ 657 million in 2020 and US $ 539 million in 2019.
As is reflected in the data, India’s export of cotton yarn to Bangladesh has increased by more than three times in two years, which is directly related to Bangladesh’s exponential increase in garment exports in 2021, for which they depended on Indian significantly.
Also to be considered in this regard is the reluctance of major fashion retailers, especially from USA and Europe, from using Xinjiang-based cotton, which are the major apparel export bastions for Bangladesh.
Even if use of man-made fibre is slowly gaining currency, it is the cotton-based garments, which hold the sway as 74 per cent of Bangladesh’s apparel offering remains cotton based still.
“We have increased cotton and yarn import from India by around 25 per cent… The growth rate is 50 per cent in value,” maintained Mahmud Hasan Khan, Managing Director of Rising Group.
The fact that Chinese Government implemented stringent quality and environmental policies leading to closure of tens of thousands of Chinese textile companies also contributed to increasing imports from India. Adding to which was the power crisis for around two months (October and November) in China, which made the trade scenario between Bangladesh and China very uncertain.
Apart from cotton and yarn, import of dyes and chemicals from India also increased last year, further added the Managing Director of Rising Group, whose observation was backed strongly by the Additional Director and Chief Executive Officer of Bangladesh Textile Mills Association (BTMA), Monsoor Ahmed, according to whom it’s the overall import of raw materials, which led India to make major gains in terms of exports to Bangladesh.
Supply chain uncertainty, geographical position favouring India
After the pandemic-induced negativity and disruptions of last one and half years, the dust has been settling down in the supply chain lately. But the emergence of Omicron and its sub variant — the World Health Organisation (WHO) has said a fast spreading variant of the Omicron virus has been detected in 57 countries recently — has once again raised the spectre of uncertainty.
Thanks to India’s geographical location vis-a-vis China and the improved connectivity between India and Bangladesh on account of increased efforts put in by both the countries in this direction— in last 10 years, at least four new waterways have been launched between Bangladesh and India.The neighbours are also jointly working to enhance rail connectivity by developing crucial railway projects and restoring some old rail links even as the Prime Ministers of the respective countries recently launched the Bangladesh-India Maitri bridge,to give a further boost to regional connectivity — will only help India to build on its new-found export dominance in Bangladesh as the former would prefer to go with India for its raw material requirements rather than risking the export growth that has come after a prolonged wait on the back fresh work orders coming the industry’s way, by depending on countries that might fail to deliver in case of further supply chain disruptions, say experts.
