Indian FIs do not favor Bangladesh imports

While the Indian government and many top Indian brands

may be gung ho about signing an agreement with Bangladesh to allow duty-free access of 46 textile as well as 15 non-textile items, banks and financial institution (FIs) in India are not so upbeat about it. In fact, many Indian banks and FIs have been given subtle guidelines to discourage importers from opening letters of credit for the import of textile products from Bangladesh. Reason: more than 200,000 people manufacturing apparel in 5,000 factories is fearing tremendous adversity following the signing of the trade protocol.

Ludhiana manufacturers of jeans, garments and sweaters fear the worst as garments can now be exported to India without duty. They feel big brands are likely to take the FDI route to set up their units in Bangladesh and this will destroy the Indian textile industry because Bangladesh has a cost advantage due to at least 50 per cent cheaper labor, duty-free availability of manufacturing machinery and raw materials apart from superior workmanship. They fear Indian stores will soon be flooded with apparels made in Bangladesh. Besides, Bangladesh is the fourth largest exporter of apparel to the world. Experts say the treaty will boost the Bangladeshi textile sector and multi-million dollar investments will be made there. Factories will be established in Bangladesh, mostly by foreign investors, eyeing the multi-billion dollar textile market in India. The result, the Indian textile sector will face tremendous setback during the coming winter season, when local demand for sweaters and denims will cross the amount of US$ 1billion.

India is trailing behind with an export volume hovering around $12 billion. Bangladesh has earned around $18 billion through exports. Some manufacturers are of the view that even China won’t be able to match the price advantage of Bangladesh as far as export of textile products to Indian market is concerned. The buzz is to safeguard the interest of Indian apparel manufacturers, the finance ministry has quietly suggested to Indian FIs to either delay every application for opening letter of credit for textile items from Bangladesh, or even refuse such applications showing technical grounds.