Bangladesh’s global image has changed dramatically in recent years. Its consistent expansion of gross domestic product (GDP) is prominent as a symbol of the persistent enterprise. It was once viewed as the epitome of Poverty and Famine.
It’s encouraging to see a South Asian country that Henry Kissinger once referred to as a “Basket Case” is now projected as an “Asian Tiger” – and that, too, during his lifetime.
Bangladesh’s per capita GDP is anticipated to increase by 4% to $1,888 in 2022, whereas India’s per capita GDP is expected to fall by 10.5 per cent to $1,877 in the same time frame. This should not have been surprising in the least.
India’s GDP had been steadily declining, from 6.8% in 2017 to 6.53 per cent in 2018. The situation worsened with Covid-19 and the GDP dropped by 4.04 per cent in 2019, before plummeting at 2% in 2020.
On the other hand, Bangladesh is the world’s sixth-fastest expanding economy in 2019, with a GDP growth rate consistently above 8%, despite the Rohingya conflict and revenue shortfalls caused by an old-fashioned tax administration.
The Aftermath of Covid-19 resulted in an 18.1% decline in Bangladesh’s readymade garment exports. Despite this, it continues to export more ready-to-wear clothing than India. On this issue, what can India learn from Bangladesh?
In 2006-07, Bangladesh exported $9.21 billion in readymade clothes while India exported $8.89 billion. Bangladesh’s readymade garment exports plummeted 18.1 per cent to $27.95 billion in 2019-20, while India’s fell 4% to $15.48 billion.
According to a report titled What explains Bangladesh’s Improved Performance in Exports, the Indian Council for Research on International Economic Relations (ICRIERS)’s states that “Bangladesh creates simple clothes in bulk, such as t-shirts and shirts. whereas India produces better quality woven and knitted items.”
What steps did Bangladesh take to become competitive?
According to a working paper titled Automation and the Future of Garment Sector Jobs: A Case Study of India, one of the primary reasons for Bangladesh’s competitiveness is its ability to produce garments at a cheaper cost than India.
Secondly, the unit labour cost of creating a cotton shirt in the United States is around $7, whereas making an identical shirt in India is about 50 cents. However, the unit labour cost in Bangladesh is merely 22 cents. Bangladesh gains a competitive advantage over the rest of the world, particularly India
Source- Bangladesh manufacturers and exporters association, centre for monitoring Indian Economy and Dhaka Tribune
Is there anything that aids Bangladesh’s ability to produce less expensive goods?
According to the Economic Survey for 2019-20, major enterprises account for more than 80% of exports in Bangladesh, while small businesses account for 80% in India. Bangladesh’s readymade garment exporters benefit from economies of scale. Bangladesh also enjoys duty-free exports to the European Union and Canada.
Reasons for India’s undersized Clothing Exports
For a seasonal sector, rigid restrictions prevent flexibility in manning. Only three or four garment manufacturers in India have a revenue of more than $100 million. As a result, Indian companies have a 63-day turnaround time from order to delivery.
This turnaround time is much shorter in Bangladesh, at around 50 days. Delivery also reaches the port in Bangladesh in just one day. In India, a consignment can take up to ten days to get to a port. All of these things function as roadblocks in achieving scale.
Key Takeaways for India-
Indian manufacturers will have to expand to increase readymade garment exports. It’s also worth noting that additional jobs in the garments sector will bring more opportunities for women to work.
Increasing women’s employment has several advantages. According to the Economic Survey of 2016-17, the rise of the garment sector boosted female schooling, the total fertility rate, and women’s labour force participation in Bangladesh.