What supply concerns have been raised amid turmoil in Bangladesh & how it may impact India
Summary
TLDRIn 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
- π The current situation in Bangladesh is marked by violence, turmoil, and destruction, which is unfortunate and has resulted in loss of life and property.
- π 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.
- π½ 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.
- π India's exports to Bangladesh include agricultural products, raw cotton, oil meals, spices, and manufactured goods, particularly textile raw materials like yarn.
- π¦ India imports apparels, engineering goods, and jute from Bangladesh, with apparels constituting a significant portion of the import basket.
- π 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.
- πΌ 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.
- π 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.
- ποΈ 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.
- π 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.
- β³ 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
π 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.
𧡠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.
π 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.
ποΈ 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.
Mindmap
Keywords
π‘Matr Sura
π‘Bangladesh
π‘Trade Surplus
π‘Exports
π‘Imports
π‘Agricultural Products
π‘Manufactured Products
π‘Textile
π‘Trade Restrictions
π‘Dollar Crisis
π‘IMF Loans
π‘Diversification
π‘MSMEs
π‘Labor Laws
π‘FTA
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
[Music]
[Applause]
[Music]
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