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.

Outlines

00:00

📉 Impact of Bangladesh's Unrest on India's Trade

The first paragraph discusses the unfortunate events in Bangladesh and their potential impact on India. It highlights the trade surplus India traditionally enjoys with Bangladesh, with exports peaking at $16 billion in 2021-22. However, there has been a decline due to factors like the Russia-Ukraine war, which led to restrictions on agricultural commodity exports from India, and domestic issues in Bangladesh, such as high inflation and unemployment. The conversation emphasizes the importance of analyzing how these events might affect India's trade, particularly focusing on the decline in exports and imports over the last two years.

05:02

🧵 Trade Dynamics Between India and Bangladesh

This paragraph delves into the specifics of India's trade with Bangladesh, identifying the major export and import categories. India primarily exports agricultural products and manufactured goods, with cotton, oil meals, and spices being key agricultural exports, and yarn being a significant manufactured export. Bangladesh processes these raw materials and is known for its apparel exports, which have been affected by the current crisis. The discussion also touches on India's import of apparels from Bangladesh, which constitutes a significant portion of India's import basket, and the potential for disruption in this sector due to Bangladesh's turmoil.

10:03

🌐 Opportunities and Challenges for India in the Textile Sector

The third paragraph explores the potential opportunities and challenges for India in the textile sector amidst Bangladesh's unrest. It points out that India's textile sector, particularly the MSME segment, lacks the capacity for bulk processing and economies of scale, which Bangladesh leverages for its competitive advantage. The conversation suggests that India could benefit from the crisis if it addresses structural issues, diversifies its export basket, and improves its textile value chain. However, it also acknowledges the need for medium to long-term strategies to truly capitalize on the situation.

15:04

🛍️ Immediate and Long-Term Strategies for India's Textile Exports

The final paragraph addresses the immediate and long-term strategies India could employ to take advantage of the current situation in Bangladesh. It emphasizes the need for short-term measures to boost exports and long-term plans to enhance domestic capacity and diversify into man-made fiber-based garments, which are in higher demand. The discussion also considers the potential competition from other countries like Vietnam and Cambodia and the importance of India's readiness to scale up and diversify its textile exports to prevent losing out on the opportunity presented by Bangladesh's current challenges.

Keywords

💡Matr Sura

Matr Sura is the name of the show from which the transcript is derived. It appears to be a discussion or interview-based program, likely focusing on current events and analysis. The name itself does not provide a specific theme but sets the context for the type of content being discussed.

💡Bangladesh

Bangladesh is a country in South Asia and is the central focus of the video's discussion. The script mentions the country's current state of violence and turmoil, which is affecting its economy and trade relations, particularly with India.

💡Trade Surplus

A trade surplus occurs when a country exports more goods and services than it imports. In the context of the video, India has traditionally had a trade surplus with Bangladesh, indicating that the value of India's exports to Bangladesh exceeds the value of its imports from Bangladesh.

💡Exports

Exports refer to goods and services that are produced in one country and sold to another. The video discusses India's exports to Bangladesh, which have been significant, particularly in the areas of agricultural products and textiles.

💡Imports

Imports are goods and services that are brought into a country from another country. The script mentions India's imports from Bangladesh, which include apparels and other items, but are more focused on textiles and readymade garments.

💡Agricultural Products

Agricultural products are goods produced from farming or agriculture. The video highlights that agricultural and allied products make up a significant portion of India's exports to Bangladesh, including raw cotton, oil meals, and spices.

💡Manufactured Products

Manufactured products are goods that have been processed or crafted from raw materials. In the video, manufactured products, specifically textiles excluding readymade garments, are mentioned as a major export category from India to Bangladesh.

💡Textile

The textile industry involves the production of fabric and other textile goods. The script discusses the importance of the textile sector in India's trade with Bangladesh, particularly the export of raw materials like yarn and the import of readymade garments.

💡Trade Restrictions

Trade restrictions refer to limitations or bans imposed on the import or export of certain goods. The video mentions that the Russia-Ukraine war led to India imposing trade restrictions on agricultural commodities, affecting exports to Bangladesh.

💡Dollar Crisis

A dollar crisis typically refers to a situation where a country faces a shortage of foreign currency, affecting its ability to import goods. The script mentions Bangladesh facing a dollar crisis, which has contributed to a decline in demand from India.

💡IMF Loans

The International Monetary Fund (IMF) provides financial assistance to countries facing economic difficulties. The video mentions Bangladesh seeking loans from the IMF due to its economic challenges, which could affect its trade with India.

💡Diversification

Diversification in the context of trade refers to expanding into different types of goods or markets to reduce risk and increase opportunities. The video suggests that India needs to diversify its exports, particularly in the textile sector, to take advantage of potential opportunities arising from the situation in Bangladesh.

💡MSMEs

MSMEs stands for Micro, Small, and Medium Enterprises. The script discusses the need for India's textile sector, which is largely composed of MSMEs, to scale up and diversify to better compete in the global market.

💡Labor Laws

Labor laws are regulations that govern the relationship between employers and employees. The video mentions that Bangladesh has leaner labor laws, which have attracted some Indian producers to shift their bases there, and that India may need to review its labor laws to become more competitive.

💡FTA

FTA stands for Free Trade Agreement, which is a pact between two or more countries to reduce trade barriers. The script suggests that ongoing talks for an FTA between India and Bangladesh may be affected by the current turmoil in Bangladesh.

Highlights

Bangladesh is India's largest trading partner in South Asia with a trade surplus for India, peaking at $16 billion in exports in 2021-22.

India's exports to Bangladesh have declined to around $11 billion in the last financial year due to factors like the Russia-Ukraine war and domestic issues in Bangladesh.

Agricultural products and manufactured goods, particularly raw cotton, oil meals, and yarn, account for over 75% of India's exports to Bangladesh.

Bangladesh is a major market for India's raw cotton, with half of India's global raw cotton exports going to Bangladesh.

India's imports from Bangladesh are dominated by apparels, with Bangladesh supplying almost one-third of India's apparel imports.

Bangladesh's apparel exports have grown due to its LDC status providing duty-free access to Western markets under the Everything But Arms scheme.

The China Plus One strategy has also boosted Bangladesh's apparel exports as countries diversify away from China.

India's textile sector faces challenges in scaling up and diversifying into man-made fiber-based readymade garments compared to Bangladesh.

India needs to enhance domestic capacity, improve technology, and diversify its export basket to take advantage of the current crisis in Bangladesh.

Bangladesh's loss could potentially be India's gain if India addresses its textile sector's weaknesses and scales up production.

India's textile sector is labor-intensive and has the potential to generate significant employment if properly developed.

Bangladesh's advantage in lean labor laws and lower labor costs has attracted some Indian producers to shift their base.

The ongoing turmoil in Bangladesh may disrupt the FTA negotiations with India, affecting trade relations.

India needs to review its textile export strategy, focusing on diversification and bulk processing capabilities.

Vietnam and Cambodia may also benefit from the crisis in Bangladesh, so India needs to act quickly to capitalize on the opportunity.

The crisis in Bangladesh presents a window of opportunity for India to review and improve its textile exports before Bangladesh loses its LDC status.

India's agricultural exports, particularly raw cotton, are significantly impacted by the situation in Bangladesh, affecting farmers.

Transcripts

hello and welcome to this episode of

matr sura I'm TCA Sharad ragavan Deputy

editor at the print and now what's

happening in Bangladesh the violence the

turmoil it's unfortunate the destruction

of property the loss of life all of that

is unfortunate but we in India have to

also look at how this will affect us is

it our pain or is it our gain to analiz

this we have with us radika Pand

associate professor at nipfp thank you

so much radika thank you sh so now

radika I'm guessing that the the main

impact on India has to do with trade

right so what has been the trend of

India Bangladesh trade both imports and

exports so traditionally we have had a

trade surplus with Bangladesh and uh our

exports to Bangladesh have been rising

and they peaked at $16 billion in

22122 so uh Bangladesh is India's

largest trading partner in South Asia

and it has been amongst the top 10

export destinations for India for many

years so it is one of the major trading

partner in terms of exports and because

our exports have been more than our

Imports we have enjoyed a trade surplus

with Bangladesh uh so in terms of the

trajectory of exports exports have been

rising but they peaked in 2021 22 and

after uh you know in the last 2 years

there have been some moderation in our

exports to Bangladesh and it has to do

with a number of factors like uh the

Russia Ukraine war that led to uh India

imposing some restrictions on uh trade

of agricultural Commodities like rice

sugar wheat so that led to some uh

dation in our exports uh and also in

terms of uh Bangladesh facing some

domestic problems like high inflation

high unemployment dollar crisis you know

Bangladesh has been asking for loans

from IMF so that also resulted in some

uh decline moderation in demand from uh

Bangladesh so $16 billion was the peak

and since then there has been a decline

and in the last Financial year our

exports were around $ 11 billion that's

quite a sharp decline there is a sharp

decline yes so that is in terms of our

exports if you look at Imports uh the

range has been somewhere between1 to2

billion again it peaked in

2022 23 and uh last Financial year there

was a decline so in both in terms of

exports and imports there has been uh

decline in the last two years but still

in terms of exports Bangladesh is a

major trading partner uh for India and

it's a major market for uh some of our

uh export Commodities particularly you

know agricultural products and uh

textiles excluding readymade garments

right actually I was going to get into

that next uh what do we trade with them

what do we export to them largely and

what do we import from them yeah so if

we look in terms of first in terms of

exports in terms of the broad category

uh agricultural products and

manufactured so these two are the broad

categories Agricultural and Allied

products and manufactured products

together account for more than 75% of

our exports to uh Bangladesh now within

Agricultural Product there are three key

items one is cotton raw cotton that is

something that we export to them and

half of our Global export of raw cotton

goes to Bangladesh so if there is a hit

if there is a political turmoil in

Bangladesh if there is a disruption then

that will impact our exports because

Bangladesh is a major market for uh raw

cotton and including the uh waste raw

cotton uh the other important thing is

oil meals so you know what comes out

after the extraction of oil the raw

material uh that is another major export

item that we uh export to Bangladesh and

again Bangladesh is our top exporter of

both cotton raw cotton and oil meals and

then spices so these are the three

Commodities within the Agricultural and

Allied product we also export vegetables

we also export rice wheat but again the

share is lower these are the three broad

items within the agricultural products

namely cotton uh raw cotton spices and

oil meals now coming to manufactured

products the main item is the textile

excluding readymade garments so that is

like yarn okay so yarn is one of the

major item that we uh export to uh uh

Bangladesh and we are exporting

Bangladesh is our second most important

market after the US for export of uh uh

textiles excluding rade garment so if

you look at the you know the value chain

of textile rade garment is at the final

end yeah it's the last first you have

the fiber then it is uh there is

spinning there is weaving then there is

fabric uh then uh that is processed and

then there is readymade garment so there

are these steps so we are exporting we

are the exporter of raw materials to uh

Bangladesh uh and then Bangladesh

processes and it has you know we can

talk about it has developed its

expertise in uh apparel Goods uh exports

and it has comparative advantage there

but in terms of the textile raw

materials the initial uh pH phes of the

value chain we are Bangladesh is our

major export market and what we are uh

you know what there are reports that

Surat in Gujarat is one of the major

exporter of fabrics and uh there is

there that has taken a hit because you

know this is the time when uh Durga Puja

is approaching Festival season is

approaching so there is lot of demand

for Fabrics designs and that has taken a

hit because of Crisis and there is

Crisis there as I said said there are

problems earlier also there is dollar

shortage now there is closure so that

has resulted in delay in payments and

you know all the consequent

ramifications right and so now overall

Bangladesh in the world exports is a

small player but there are particular

sectors as you mentioned where it is

quite dominant and uh those could see

some disruptions due to the turmoil

right and that will have KnockOn effects

yeah so again if we just talk in ter

terms of imports uh you know Bangladesh

what Bangladesh is importing to us is uh

apparels because it is processing and

then it is uh importing apparels to us

so that will take a hit so in terms of

import basket oneir of uh our imports

from Bangladesh is apparel and then

there are other items like engineering

Goods but they are small now coming to

Bangladesh uh you know it has emerged as

a major export hub for apparels uh

mainly because of

two factors one is that uh uh because of

its LDC status it is least developed

country uh European nations provide

duty-free access to uh ldcs other than

the uh defense equipment so there is a a

scheme called Everything But arms so

that's under that scheme Bangladesh is

able to provide dutyfree uh Bangladesh

is able to get dutyfree access to uh its

exports in the major uh European market

so we have seen that if we look at

Bangladesh trade Germany us UK these are

major export destinations for

Bangladesh's apparel uh products uh so

in terms of the overall uh Bangladesh's

export basket mhm more than 90% is

textiles right and out of that 85% is

apparel so that is the final end of the

value chain and Bangladesh has been

exporting to us Bangladesh is exporting

to uh Western markets and so on so one

reason as I mentioned is because uh

Bangladesh has the LDC status and

therefore it enjoys dutyfree access to

uh Western Market so it's able it it has

a Competitive Edge there that is one

where India loses because India doesn't

get dutyfree access that is number one

and second is the China plus one

strategy has also given an edge to uh

Bangladesh so uh there has been a

diversification from China towards Bang

Bangladesh for you know import of

apparel products so in addition to that

Bangladesh has low labor costs and it

has you know it has the ability to uh

produce in bulk which is something that

we lack you know if we look at our

economic survey this time there is a

entire discussion on uh textiles and

what ails uh India's textile sector and

one of the main item one of the main

reasons that have been pointed out is

that you know most of our textile

producers including parel producers are

in the msme sector they do not they

cannot reap the advantages of economies

of scope and scale and therefore there

is a uh you know even if there is a bulk

order we cannot process that immediately

so there is a lot of talk about whether

Bangladesh's loss can be India gain

India's gain potentially it can be

because if the the crisis continues if

it is marred by political instability

the markets the alternate the markets

will look for alternate markets and

there India Vietnam and Cambodia stand

to gain okay but how much we can gain we

have to look at our own structure of uh

you know the textile value chain and

what alss one as I mentioned is msme the

other is fragmented nature so we have to

overcome that and the other important

thing is we what we export you know we

are exporting only 3% of our export

basket is apparels compare in contrast

with Bangladesh where it is almost 85%

is apparel so we have to diversify we

have to look at what is the demand and

there is greater demand for man-made

fiber based readymade garments and this

is where we are not in the market we are

mostly exporting cotton linked apparel

so there is a need for diversification

there is a need for enhancement of

capacity and uh Improvement in

technology in order to reap the

advantages uh that potentially we can

have if the crisis in Bangladesh is

protracted right but uh just to get a

little more idea on how important

Bangladesh is in this readymade apparel

Market do we know how much the Imports

that we do of readymade apparels what

percentage of that Bangladesh

constitutes yeah almost onethird of uh

our Imports what what we are importing

almost onethird of that is in terms of

uh apparels of Bangladesh which is in

terms of of uh if we talk in terms of

global markets it is almost 40% so that

is how important Bangladesh is to us in

terms of import of uh appar products the

other reason why it tends to gain is

because it is able to import also

Chinese cheap Chinese raw material it

imports from India it also imports from

China so all these uh factors gives give

it an edge over the export of apparel

products and we are also exporting and

if we look at our exports it has been uh

exports have been rising so almost 1/3

of our import basket is constituted by

readymade garments from Bangladesh so if

you look at our export basket it is much

more Diversified you know we export Agri

products we export textile raw materials

we also export engineering Goods to them

uh but when it comes to import it is

mostly concentrated in textiles and

readymade garments

and also one another item is jute so

these two items constitute our major uh

you know item that we import from uh

Bangladesh it's much more concentrated

right but now you mentioned uh things

that we need to do but those sound like

a little medium term or a long term is

there anything that we can do in the

short term to immediately take advantage

of this opportunity that has been

created so we have so there are all

these estimates about you know that if

there is a diversification to some

extent our exports will rise uh 25 to30

billion per month we can see we do have

the capacity but in the long run because

there are other markets also we have to

compete with Vietnam we have to compete

with Cambodia who are also the potential

gainers from this uh possible

diversification from uh Bangladesh uh so

in order we can have short-term uh

benefit but in order to take long-term

sustained Advantage we need to to

enhance our domestic capacity and uh we

have a window because Bangladesh will be

losing its LDC status in one two years

so then Bangladesh will also be

competing with the Emerging Markets so

we do have time but this is an

opportunity to review the factors that a

India's textile exports because we are

one of the major exporter and this is a

time to review what ails and what what

constraints are exports and what we can

do BAS basically we need to diversify

into other uh uh item that are mainly uh

demanded in the uh Global markets and we

should have the capacity to process in

bulk which requires having big factories

and not just limiting ourselves to MSM

so those are some of the factors and

potentially the textile sector can

generate a lot of employment as well yes

it is a labor intensive sector it can

generate and again in economic survey

there is a table which shows uh you know

the uh contribution of various uh

manufacturing sectors for towards gva

gross value addition and textiles and

textile is one of the major uh potent

major employer of major employer it's a

major labor intensive sector so we need

to focus on that so that's very uh

important and the other is what

Bangladesh has an advantage is in terms

of leaner labor laws and in terms of

Labor uh cost so a lot of our producers

have actually shift Ed base to

Bangladesh to take advantage of those uh

fundamental corporate comparative

advantage factors so those will also

suffer uh there is a talk about Free

Trade Agreement uh since the end of last

year that will potentially take a hit

due to these so so it's not that

Bangladesh is not an important trading

partner it is particularly for our Agri

markets it is a very important trading

uh uh destination and given that we have

our Harvest for crops is approaching

right so this is a time when uh we need

markets right and uh now you mentioned

uh some of our competitors like Vietnam

and so regarding that we have a question

from the audience sankalp says that I'm

assuming that you see an opportunity in

the readymade Garment sector and he's

right uh don't you think Vietnam is more

likely to reap benefits than us after

all we are nowhere close to

incorporating synthetic fibers in our

man ufacturing processes nor do we have

any favorable procurement agreements

yeah so that is the point I mentioned

that you know there is a greater uh

demand for man-made fiber based rmade

garments and if we look at look at our

exports whatever we are exporting of

readymade garments our exports of MMF

the man-made fiber based readymade

garments is a very miniscule proportion

of our overall export of rade garment so

uh there is a scope for diversification

there's a scope to uh review the global

market where there is a demand and then

focus on that and uh right now it is

mostly focused on a few items within the

rmade uh garments which is you know

mostly cotton and uh small to Mid uh

items so we need to focus on MMF based

uh item so that is definitely there and

if we do not then uh he's right that you

know Vietnam will take an edge and other

markets will take an edge so there is a

need for diversification and there is a

need for complete uh review of the

market

harmonization labor laws a lot of things

need to be done towards making us uh

more competitive in the uh textile

Market but definitely there is a window

of opportunity here okay so there you go

Bangladesh is an important trading

partner of India just because they're a

smaller country doesn't mean they aren't

significant in our trade landscape we

have a trade surplus with them but the

thing is that the opportunities that are

being created due to the turmoil that's

happening right now in Bangladesh have

to do with areas where India is not

particularly strong right now so there's

a lot of work we need to do especially

to do with readymade garment exports

first we need to kind of scale up with

the the the sector is mainly focused

around msmes we need to help them scale

up so that they can start exporting into

the world at scale and the second is

that we need to diversify what we're

exporting right now it's too

concentrated on Cotton exports we need

to diversify diversify this to man-made

fibers because that's there's there's

demand for that so if we can grow there

then we can take advantage of what's

happening in Bangladesh and not let

other competitors like Vietnam or

Cambodia take this Advantage from us so

there is work for us to do I mean there

is an opportunity and there's work for

for us to do but whether we can take

advantage we'll we'll have to wait and

see but on that note that's all from us

thank you so much for watching

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