How will Bangladesh garment industry suffer for escalating tension with India? New Delhi's masterstroke against Muhammad Yunus...

The recent escalation in the tensions in the India-Bangladesh trade relations came soon after New Delhi had signed a Free Trade Agreement (FTA) with the UK. India is also working on a similar FTA with a 27-nation economic bloc of the European Union (EU). India blocked the land port entry for goods coming from Bangladesh on Saturday. Bangladeshi goods that would not get the transit and airport facilities in India include ready-made garment (RMG), cotton waste, PVC products, carbonated beverages, and wooden furniture. However, these goods can be exported using the Kolkata and Nhava Sheva sea ports. This may impact the garment exports of Bangladesh adversely and offer a golden opportunity to India to boost its garment exports, particularly to the EU. 

Bangladesh garment exports

With exports of $36 billion in 2023, Bangladesh is the second largest exporter of readymade garments after China. It is followed by Vietnam, India, Turkey, Italy and Germany, Thailand, Indonesia, the US and Taiwan. According to the Export Promotion Bureau (EPB),   Bangladesh's ready-made garment exports grew by 7.23% in 2024, reaching $38.48 billion.

Garment exports from India

According to the government agency Press Information Bureau, India was the 6th largest exporter of Textiles & Apparel in the world in 2023. The share of textile and apparel (T&A), including handicrafts, in India’s total exports stood at a significant 8.21% in 2023-24. Ready Made Garments (RMG) with export of $8.733 billion has the largest share (41%) in the total exports of $21.358 billion. It was followed by cotton textiles (33%, $7.082 billion), Man-made Textiles (15%, $ 3.105 billion) from April to October of FY 2024-25. 

How will FTA impact garment exports?

According to the India-UK FTA, garments exported from India will be tariff-free. These will be levied with zero tariff. It will certainly boost the garment exports to the UK. If a similar FTA is signed with the 27-nation EU, Indian garment exports may increase manyfold.

This will certainly hit Bangladeshi garment exports. If New Delhi adheres to its decision of not giving the land port facility to Bangladeshi readymade garment, Dhaka will have to face a delay in delivery, its cost will increase, making its exports less competitive. This will adversely impact their exports and the garment industry as a whole.