Context: Bangladesh continues to export more readymade garments than India, despite fall in exports(FY20) due to the negative impact of the pandemic.
Comparing stats related to garment exports of India and Bangladesh
- In 2006-07, Bangladesh exported more readymade garments from India for the first time.
- Bangladesh exported worth $9.21 billion while Indian exports stood at $8.89 billion.
- In 2019-20, readymade garment exports of Bangladesh fell 18.1% to $27.95 billion, while that of India fell by 4% to $15.48 billion.
Advantages for the garment industry in Bangladesh
- Production in bulk:
- Bangladesh produces simple apparel such as t-shirts, shirts in bulk.
- On the other hand, India manufactures superior quality woven and knitted products.
- Cheap production cost and competitive advantage over the rest of the world:
- One of the major reasons for Bangladesh’s competitiveness is that it is cheaper to produce goods in Bangladesh than in India.
- The unit labour cost of producing a cotton shirt in the United States is around $7, while the same in India comes at around 50 cents, whereas in Bangladesh it is only 22 cents.
- Presence of the large industries:
- According to the Economic Survey of 2019-20:
- Bangladesh has more than 80% of the market value of exports by large enterprises.
- On the other hand, India has 80% of the market value of exports by small enterprises.
- Trade agreements
- Bangladesh’s exports to the European Union and Canada are largely duty-free.
Why do Indian garment exporters lack scale?
- Rigid laws in India prevent flexibility in operating for a seasonal industry.
- India has only three or four garment makers with a turnover in excess of $100 million.
- More turnaround time
- Turnaround time of Indian firms from order to delivery is 63 days. In Bangladesh, this turnaround time is far less at 50 days.
- Also, it takes only one day for a consignment to reach a port in Bangladesh. While in India, it can take as many as 10 days for a consignment to reach a port.
Lessons for India
- Bigger size of the firms:
- In order to increase exports of readymade garments, Indian firms will have to grow bigger.
- Increasing employment for women in the sector:
- If there are more jobs in the garments sector, it will provide a working opportunity for women.
- According to the Economic Survey of 2016-17 “In Bangladesh, female education, total fertility rate, and women’s labour force participation moved positively due to expansion of the apparel sector."