In a surprise announcement today, Anand Sharma, the Union commerce minister, said the government was considering removing the restriction on import of readymade garments from Bangladesh ahead of the prime minister’s visit on September 6-7. Bangladesh has been pitching for this for quite some time.
“The decision will hamper the entire Indian textile industry, resulting into massive job losses. Most textile industry including powerlooms, spinning and dyeing, belongs to the unorganised sector, which has been struggling with low export orders. It would worsen the industry’s condition if the government gives prominence to the Bangladeshi textile industry at the cost of India," said Shishir Jaipuria, chairman of the Confederation of Indian Textile Industry (Citi).
The Indian government had already raised duty-free import quota of readymade garments from Bangladesh by two million pieces to 10 million pieces in April this year. But, Dhaka wanted to access India’s mass consumption market duty free. Bilateral trade between the two countries stood at $2.6 billion in the FY10.
Cheap labour is the major advantage for the textile industry in Bangladesh as compared to India. Textile being a labour intensive industry, any unfavourable trade policy will hit the entire industry badly.
According to D K Nair, secretary-general of Citi, the decision will be a major blow to the lower end of the domestic textile industry, including the major belts like the dyeing sector of Tirupur and knitwear hub of Lidhiana which provides employment to hundreds of thousands of people.
In spite of these dangers in opening up of the market to a low cost producing country, the industry had in its various interactions with the government offered that 14 of the 48 items requested by the Bangladesh government, be opened for duty-free imports. Rahul Mehta, president, of the Clothing Manufacturers Association of India, said the decision would result into imports of $2.5 billion per year in addition to a loss of nearly 1.25 million jobs.
“The government must provide a compensatory benefit to Indian textile industry by negotiating with the governments of European Union for tariff advantages in textile products even if the fabric originates from India. Apart from that, the government should also negotiate export of yarn and cotton through road," Jaipuria said.
India has been losing out to Bangladesh in apparel exports since 2009. Today, Bangladesh apparel exports are growing at 16 per cent while India’s apparel exports in 2010-11 grew by four per cent only.