The investment by Indian companies in Bangladesh garment sector is bound to surge as Indian firms try to take advantage of the lower production cost in the neighbouring country.
It is estimated that Indian textile and garment companies have already invested Rs. 30 billion (US$ 600 million) in Bangladesh during the current fiscal 2011-12, and this investment is likely to rise significantly.
Last year, the Indian Government took a decision to permit import of 48 textile and garment items from Bangladesh at zero-duty. This has also contributed to the increase in investment by Indian firms in Bangladesh. Some Indian companies are even or relocating their production base to Bangladesh.
A major advantage to Indian companies investing in Bangladesh would be with respect to the cost of labour, as minimum wage there is just Rs. 1,700 compared to the minimum wage of Rs. 5,000 in India.
Garment imports from Bangladesh to India increased around three-times to US$ 22 million during the first six months of current fiscal.
Speaking to fibre2fashion, Mr. A Sakthivel, Chairman of Apparel Export Promotion Council (AEPC), said, “A lot of Indian companies have already invested and are going to invest more money in Bangladesh garment sector, because producing goods from Bangladesh will work out 20 percent cheaper for them.”
“The rise in Indian investments in Bangladesh, along with a surge in garment imports from Bangladesh is likely to negatively impact India’s garment exports. Moreover, Bangladesh companies may also enter and compete in India’s domestic market,” he added.
To protect India’s interests, he suggested, “The Government of India can do two things. First, the 10 percent excise duty on branded garments should be removed immediately. Secondly, the Government should insist that Bangladesh should use only Indian origin yarn or fabric to produce the garments which come to India.”
Source : fibre2fashion.com