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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 Ghulam Muhammed Quader said rising
input costs in India and China - the two big players in readymade
garments business - offered a good opportunity for his country to
expand its readymade garments business.
"India is shifting away from the readymade garments business.
There has not been any significant investment in India in the
readymade 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
readymade garments business uncompetitive in India and China.
"This will be a big opportunity for Bangladesh to develop its
readymade 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 percent of the country's
exports. Bangladesh's exports in 2012 were $24.3 billion, of which
garments contributed $19 billion.
Quader said availability of cheap labour was the main reason for
the sharp increase in readymade 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.
"Many Chinese companies are opening production facilities in
Bangladesh. Even for their domestic use, they are supplying
garments form 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 readymade 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 percent duty.
Labour costs in Bangladesh are almost one-third of those in India.
The average monthly labour cost in India is over Rs.7,000 per
person, while it is just around Rs.2,500 in Bangladesh.
Due to duty concessions and low labour and other costs, garments
produced in Bangladesh become 15-20 percent 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
percent of the country's gross domestic product (GDP) and 12
percent to the total export earnings.
Quader said comparative advantage in the garments sector would
help reduce Bangladesh's trade deficit with India.
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.
(Gyanendra Kumar Keshri can be contacted at gyanendra.k@ians.in)
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