CEPA may change India-Bangladesh textile trade equation

The recent visit of Bangladesh Prime Minister Sheikh Hasina to India is likely to expedite Comprehensive Economic Partnership Agreement as both nations showed interest in deepening trade ties. Currently, Bangladesh imports more yarn and fabric from India and exports finished products like apparel. The CEPA may change this equation.

Hasina and her Indian counterpart Narendra Modi welcomed the recent finalisation of a joint feasibility study which recommended that CEPA will be beneficial for both countries. Leaders of both nations directed trade officials to start negotiations within the current year and to complete them at the earliest. The joint statement issued at the end of Hasina’s state visit to India also highlighted the proposed agreement prominently.

According to Fibre2Fashion’s market insight tool TexPro, Bangladesh is an emerging star in the global textile industry as it has succeeded in converting itself into a global factory for textile products. Bangladesh apparel exports touched $42.61 billion during last fiscal 2021-22 (July-June), registering an increase of 35.67% over the previous fiscal. On the other hand, India’s apparel exports increased 33% to $16.023 billion in the last fiscal 2021-22 (April-March) from $12.287 billion in the previous year.

Trade data explains the picture and implications of mutual trade between the two nations. As per TexPro, India imported apparel worth $474.522 million from Bangladesh in 2021, but it could manage to export apparel valued at $28.717 million to the neighbouring country. Similarly, India imported home textiles of $133.008 million and exported products of value $2.473 million.

The trend reverses in terms of raw materials. Bangladesh imports more raw materials from India. According to the data, India exported fibre earning $1430.146 million, while it imported the product spending $72.848 million. Similarly, its export of yarn and fabrics were $1968.735 million and $812.234 million respectively during the last year, while imports of yarn and fabrics were $52.274 million and $78.735 million in the same period.

Textile stakeholders in India are against the idea of exporting cotton and yarn from the country as it would enable competing countries including Bangladesh to offer tough competition to Indian exporters after getting cheaper raw materials. It shows that the Indian textile industry needs to develop its strength and formulate an effective strategy when CEPA comes into effect. However, some experts feel that both countries can identify their strengths and be supplementary rather than competing with each other.