Business Standard

With GST, Bangladesh enters Indian garments market

- DILIP KUMAR JHA

Bangladesh has started making inroads in India’s readymade garments (RMG) market, due to manufactur­ing cost advantages there after implementa­tion here of the Goods and Services Tax (GST).

The over-arching tax was implemente­d in India from July 1. And, import of RMG from Bangladesh jumped 56 per cent to $87.4 million from then to November over the correspond­ing period last year. Of this, import of knitted apparel surged 69 per cent to $30.1 mn. Import of woven apparel contribute­d the rest, $57.3 mn, from $38.1 mn in the same period last year.

In terms of volume and market size, overall import from Bangladesh isn't so much. However, the fast increase poses a threat for Indian manufactur­e. The effective protection­ist duty on import from Bangladesh during the pre-GST regime ended with the new tax. For, the cost of production at Bangladesh manufactur­ers provides them an advantage.

“We have written to the government, seeking changes in the provisions,” said Sanjay Jain, chairman, Confederat­ion of Indian Textile Industry. Garment makers in Bangladesh, says the industry, procure fabric from China duty-free. Their two other basic advantages over Indian manufactur­ers are cheaper electricit­y and cheaper labour. Indian garment makers have to pay 20 per cent import duty for the same fabric from China; their power and personnel costs are also higher.

“We have taken a number of steps, including a ~6,000 crore special package, technology upgradatio­n funds, etc, to make cost of manufactur­ing garments in India competitiv­e,” said a senior government official.

Industry sources say many RMG retailers in the organised sector have started procuring from Bangladesh in a big way.

“In the pre-GST regime, the government had protected domestic garment manufactur­ers through levy of countervai­ling duty on import, equivalent to the excise duty on domestical­ly manufactur­ed garments, in addition to education cess. This protection has gone away after GST implementa­tion. With the current regulation­s, Bangladesh­i garment manufactur­ers get 10-15 per cent of cost advantage over production in India. This needs to be addressed immediatel­y,” said Rahul Mehta, president, Clothing Manufactur­ers Associatio­n of India.

 ??  ??
 ??  ??

Newspapers in English

Newspapers from India