What supply concerns have been raised amid turmoil in Bangladesh & how it may impact India

Summary

In this episode of 'Matr Sura', Deputy Editor at The Print, TCA Sharad Ragavan, discusses the impact of Bangladesh's current turmoil on India's trade. Associate Professor Radika Pand highlights India's trade surplus with Bangladesh, particularly in agricultural products and textiles. The conversation delves into the challenges faced due to geopolitical events and Bangladesh's economic issues, leading to a decline in India's exports. It also explores opportunities for India in the readymade garment sector, emphasizing the need for diversification and scaling up to remain competitive amidst the crisis.

Takeaways

• 😔 The current situation in Bangladesh is marked by violence, turmoil, and destruction, which is unfortunate and has resulted in loss of life and property.
• 📈 India has traditionally enjoyed a trade surplus with Bangladesh, with exports peaking at $16 billion in 2021-22, making Bangladesh India's largest trading partner in South Asia.
• 🔽 There has been a decline in India's exports to Bangladesh since the peak, with the last financial year showing exports around $11 billion, affected by factors like the Russia-Ukraine war and domestic problems in Bangladesh.
• 🛑 India's exports to Bangladesh include agricultural products, raw cotton, oil meals, spices, and manufactured goods, particularly textile raw materials like yarn.
• 📦 India imports apparels, engineering goods, and jute from Bangladesh, with apparels constituting a significant portion of the import basket.
• 👕 Bangladesh is a major export hub for apparels, benefiting from its LDC status, which provides duty-free access to Western markets, and the 'China plus one' strategy diversifying from China.
• 💼 The textile sector is a significant employer and contributor to India's economy, but India's textile exports are currently facing challenges due to factors like the MSME structure and lack of economies of scale.
• 🌐 The crisis in Bangladesh presents a potential opportunity for India to increase its textile exports, especially if the country can address structural issues and diversify its export basket.
• 🛍️ India needs to focus on diversifying its exports to include more man-made fiber-based readymade garments, which are in higher demand in the global market.
• 🔄 There is a need for short-term measures to capitalize on the current situation and long-term strategies to enhance domestic capacity and competitiveness in the textile sector.
• ⏳ Bangladesh is set to lose its LDC status in the coming years, which could level the playing field with India and other emerging markets, presenting a window of opportunity for India.

Q & A

What is the current situation in Bangladesh that is being discussed in the video?

The video discusses the violence, turmoil, and destruction of property in Bangladesh, which has resulted in loss of life and has implications for India.

How has the trade between India and Bangladesh been traditionally characterized?

Traditionally, India has had a trade surplus with Bangladesh, with exports to Bangladesh rising and peaking at $16 billion in 2021-22.

What are the main factors contributing to the decline in India's exports to Bangladesh in recent years?

The decline in exports is attributed to factors such as the Russia-Ukraine war leading to restrictions on agricultural commodity trade, and domestic problems in Bangladesh like high inflation, unemployment, and a dollar crisis.

What are the broad categories of India's exports to Bangladesh?

The broad categories of India's exports to Bangladesh are agricultural products and manufactured products, which together account for more than 75% of the total exports.

Which commodities within the agricultural and allied products are key exports from India to Bangladesh?

Key commodities include raw cotton, oil meals, and spices, with Bangladesh being the top exporter for these items from India.

What is the primary manufactured product that India exports to Bangladesh?

The primary manufactured product exported from India to Bangladesh is textile excluding readymade garments, specifically yarn.

How has the political turmoil in Bangladesh impacted the textile industry, particularly in Surat, Gujarat?

The political turmoil has resulted in a crisis that has affected payments and caused delays, impacting the demand for fabrics and designs, especially as the Durga Puja festival season approaches.

What is Bangladesh's status in the global market for apparel exports, and why is it significant?

Bangladesh is a major export hub for apparels, mainly due to its LDC status which provides duty-free access to European markets, and the China plus one strategy which has diversified imports from China towards Bangladesh.

What are the potential short-term and long-term strategies for India to take advantage of the situation in Bangladesh?

In the short term, India can look to diversify its export basket and scale up its manufacturing capacity. Long term, it needs to focus on enhancing domestic capacity, improving technology, and diversifying into items that are in demand in the global market.

What is the importance of the readymade garment sector for Bangladesh's economy, and how does it affect India?

The readymade garment sector is crucial for Bangladesh's economy, accounting for more than 90% of its export basket. For India, it represents an opportunity to diversify its own textile exports and capture a larger share of the global market.

How does the audience's concern about Vietnam being more likely to benefit from the situation in Bangladesh compare to India?

The concern is that Vietnam might benefit more due to its readiness to incorporate synthetic fibers in manufacturing and having favorable procurement agreements, whereas India's focus is more on cotton-based products.

What is the potential impact of the crisis in Bangladesh on India's agricultural market, especially with the upcoming harvest season?

The crisis could affect India's agricultural market as Bangladesh is an important trading destination. With the harvest season approaching, India needs markets for its crops, and any disruption in Bangladesh could impact this trade.