Imports From Bangladesh May Impact Textile Companies.

The government's recent move to grant duty-free access of 46 garment products from Bangladesh will not impact large textile companies which are into retailing. Rather, it will hurt small retailers who do not have the wherewithal to set up shop in Bangladesh.

Large textile firms, which have significant exposure to retailing big brands, have already set up units in Bangladesh. This grant from the government would result in joint collaborations of Indian textile and retailers with Bangladeshi manufacturers. In recent years, Bangladesh has emerged as an economical and lucrative garment-manufacturing hub for many European countries and also China.

According to estimates, Bangladesh has outstripped India in garment exports. Sanjay Jain, VP, Federation of Hosiery Manufacturer Association of India and joint MD at TT, says that Bangladesh exports 50% more garments than India. Factors such as cheap labour (almost one-third of the Indian labour costs), cheap power (50% lower ) and 30-40% lower production costs have made Bangladesh cost effective and a lucrative textile hub for companies based in China and Europe.

Such has been the growing importance of the Bangladesh market that, according to CMI-India Trades data, imports from Bangladesh to India have risen to 3.3% (of total imports) in 2011 from 0.2% in 2006, while India's exports to Bangladesh have been hovering around 2% (of total exports) in the past five years.

Chinese firms that are known for fabrics export to Bangladesh and procure garments duty-free. In India, Chinese companies have to reckon with duty for exporting of fabrics. Experts say this move willprovide a backdoor entry for Chinese fabrics into India. Back home, companies which are into man-made and synthetic fibre would be impacted the most compared to large listed peers which have cotton-specific business.

Besides, small retailers in West Bengal, Ludhiana and Gandhinagar will also be affected. In the listed category, however, most companies, which have cottonspecific (like trading) will not be impacted. Rahul Mehta, president, Clothing Manufacturing Association of India believes that on a conservative estimate of $2.5 billion exports to Bangladesh, Indian labourers would lose 1.25 million jobs with the latest move.

Source : economictimes.indiatimes.com