Bangladeshi Textiles

For quite some time, I was hearing that Bangladesh was growing fast, that it was even outperforming India. I finally got around to pulling up the data on the two countries only recently and here is how the comparison looks:

 The graph shows that Bangladesh hasn’t outperformed India, but yes, it has been growing steadily at a good pace and in some years, grown faster than India.

 

In one sector though, Bangladesh has eaten into India’s share – textile and apparel exports. Pranay Kotasthane looked into how and why that has happened. The reason this sector matters, he says, is that it can employ a lot of people and it doesn’t require any educational qualifications, thus making it a great fit for our population.

 

One reason is that the West has given preferential treatment to Bangladeshi exports as part of its policy of helping poorer countries. The other major reason, he says, is a self-inflicted wound by India. Let us understand that next.

 

The global demand for artificial fabric-based cloth (like polyester) is much higher than that for natural fabric-based cloth (like cotton). This is due to cost and durability considerations.

“India’s underperformance is largely due to a decline in its exports in the artificial fibre segment.”

But why has our share of the artificial fibre market fallen? One of the inputs for artificial fibre is a chemical called PTA. In 2013, two domestic companies who manufactured PTA lobbied the government to impose higher duties on the import of PTA from other countries. This had a cascading effect – the cost of PTA in India went up, in turn increasing the cost of apparel made here, and unintentionally making Bangladeshi apparel more attractive.

 

Policy making is tough and honest errors are unavoidable; but this one was made (and continued) due to vested interests (the two domestic manufacturers of PTA).