NEW DELHI: Many Indian garment makers have shifted base or opened new units in neighbouring Bangladesh to take advantage of low labour cost and duty concessions on exports to US and European markets.
"Labour cost in Bangladesh is almost one-third of that in India. Average monthly labour cost in India is over Rs.7,000 per person, while it is just around Rs.2,500 in Bangladesh," said D.K. Nair, secretary general of the Confederation of Indian Textile Industry.
"More than 35 Indian textile firms have opened factories in Bangladesh so far, most of them in the recent months," Nair, who oversees the apex industry body for the $55-billion Indian textile industry, said.
Some of the leading Indian garment exporters like Shahi Exports, House of Pearl Fashions, Jay Jay Mills and Ambattur Clothing are using Bangladesh as an important destination in their journey to the western markets.
According to Bangladesh's Board of Investment, Indian textile firms have invested nearly $80 million in 35 factories.
Bangladesh, which is categorised as a least developed country (LDC), enjoys duty-free access to European markets, while Indian firms have to pay 9.6 per cent duty.
"If you take duty concessions, labour and other costs into account, garments produced in Bangladesh is almost 20 per cent cheaper," said Nair, alluding that it thus becomes difficult for Indian firms to compete globally.
This apart, the aggressive monetary tightening policies of the Reserve Bank of India (RBI) in the recent months has also made cost of capital expensive and further added to the woes of Indian textile makers.
O.P. Lohia, chairman and managing director of Indo-Rama Synthetics , a leading polyester fibre maker, said Indian companies were attracted to Bangladesh despite relatively poor infrastructure and uncertain political situation.
"Textile companies are facing cut-throat competition. Profit margin is very low and 15-20 per cent cost difference is a big thing. So people are getting attracted to Bangladesh," Lohia told IANS.
He said even China is not able to stand the competition and is losing its share of exports in US and European markets to Bangladesh.
"Textiles is perhaps the most labour intensive industry. In Bangladesh labour is not only cheap but also easily available when you compare it with India and China," Lohia said.
Besides labour cost and duty advantage, raw materials and real estate costs are also cheaper in Bangladesh.
In a bid to help the domestic industry, Indian Commerce Minister Anand Sharma said the government has adopted a multi-pronged strategy to address the concerns of garment makers and exporters.
"I am aware that there is a serious concern on exports to the US and European countries," Sharma said, adding that the government will provide incentives to exporters in the form of interest subsidy and duty benefits.
Source : economictimes.indiatimes.com