India and Bangladesh are two major players in the global apparel export industry. While India has a long history of textile production, Bangladesh has emerged in recent years as a leading apparel exporter, particularly to markets in the United States and the European Union.
As both countries vie for a larger share of the global market, the question arises: Can India surpass Bangladesh in apparel exports? To understand this, we need to explore several factors, including production capacity, labour costs, government policies, and market dynamics.
Bangladesh’s Dominance in Apparel Exports
Bangladesh has built its success in apparel exports primarily through its focus on low-cost, large-scale garment production. In 2022, Bangladesh exported garments worth $45.71 billion, making it the world’s second-largest apparel exporter after China. The country’s strengths are built on the following pillars:
Competitive Labor Costs: Bangladesh has one of the lowest minimum wages in the global textile industry, making it an attractive destination for brands seeking cost-efficient production. According to the World Bank, Bangladesh’s wage rates are significantly lower than those of India, giving it a competitive advantage in the mass production of basic garments.
Duty-Free Access to Key Markets: Bangladesh enjoys preferential access to major global markets like the European Union under the Generalized System of Preferences (GSP) and duty-free benefits in many other markets as a Least Developed Country (LDC). This has allowed Bangladesh to export goods at more competitive rates than many of its competitors.
Specialization in Ready-Made Garments (RMG): The Bangladeshi apparel industry is largely concentrated on producing low-cost, ready-made garments (RMG). Over the years, the country has invested heavily in building efficient factories and fostering a robust ecosystem, which has boosted its capacity to handle large orders from global brands.
Infrastructure Investments: Bangladesh has significantly improved its production capacity with better logistics, port facilities, and specialized garment manufacturing zones. Its ability to scale up production quickly has been a critical factor in meeting growing demand.
India’s Strengths and Challenges
India, on the other hand, has a more diversified textile sector, producing everything from raw cotton to finished garments. However, India’s global share of apparel exports remains behind Bangladesh, with India exporting $16.58 billion worth of apparel in 2022.
Higher Labour Costs: India’s labour costs are generally higher than those in Bangladesh, which affects the price competitiveness of Indian apparel, especially in price-sensitive markets. Indian wages are nearly double those of Bangladeshi workers, which is a significant factor for buyers looking for low-cost production.
Fragmented Industry: India’s textile sector is highly fragmented, with a mix of small, medium, and large enterprises. The decentralized structure often results in inefficiencies and higher production costs, compared to Bangladesh’s more concentrated RMG sector.
Lack of Trade Preferences: India does not enjoy the same level of duty-free access to markets like the EU, making Indian goods less competitive in terms of price. For instance, Bangladeshi exports to the EU are duty-free under the Everything But Arms (EBA) initiative, while Indian apparel faces tariffs of around 9-12%.
Skilled Workforce and Technology: On the plus side, India has a more skilled workforce and superior technology infrastructure compared to Bangladesh. India’s strength lies in its ability to produce high-value and specialized garments, such as fashion wear, technical textiles, and high-end apparel.
Can India Catch Up?
While Bangladesh has several structural advantages, India has the potential to surpass its neighbour in apparel exports through strategic initiatives and reforms.
Government Initiatives: The Indian government has launched several initiatives to boost textile and apparel exports, including the Production Linked Incentive (PLI) Scheme, which provides financial incentives to boost domestic manufacturing, and the Mega Investment Textile Parks (MITRA) scheme, aimed at creating world-class infrastructure for the sector. These initiatives could enhance India’s competitiveness over the long term.
Sustainability and Compliance: With growing global emphasis on sustainability and ethical production, India could gain an edge over Bangladesh in the future. India’s apparel industry is moving toward eco-friendly practices and improved labour conditions, which are increasingly important for global buyers. Bangladesh, while improving, still faces scrutiny over workplace safety and labor rights issues.
Diversification of Product Range: India’s strength lies in its ability to offer a diverse range of products, from high-end fashion to technical textiles. By leveraging this diversity and focusing on higher value-added products, India can tap into new market segments and offer more than just low-cost production.
Improved Logistics and Infrastructure: Indian ports and logistics infrastructure are improving, with greater investments in streamlining exports. India’s ability to transport goods efficiently is vital for meeting the fast fashion demands of the global market.
Regional Comprehensive Economic Partnership (RCEP): Although India chose not to join RCEP, it continues to negotiate trade agreements with various countries and regions. Expanding its free trade agreements with key markets could help Indian apparel manufacturers compete more effectively on price with Bangladeshi goods.
Skilling and Capacity Building: India’s large and young workforce presents a demographic dividend if adequately skilled for modern manufacturing. Investment in vocational training, particularly in technical textiles and fashion design, will be crucial for scaling high-end garment production.
Conclusion
Bangladesh’s dominance in apparel exports, especially in the RMG sector, is hard to challenge in the short term, primarily due to its cost structure and duty-free access to key markets. However, India has the potential to close the gap and even surpass Bangladesh over time by focusing on higher-value products, embracing sustainability, and leveraging its skilled workforce.
Strategies that can work in India’s Favour
India has introduced subsidies, incentives for capital machinery, and support for wages in underdeveloped states like Bihar and Punjab to attract garment manufacturing investments. These policies aim to strengthen India’s position in the global garment market, with a focus on enhancing production standards, worker skills, and attracting foreign investment.
However, India’s garment exports in the 2023-24 fiscal year were less than half of Bangladesh’s, with India exporting $14.5 billion compared to Bangladesh’s $36.16 billion.
A key challenge for India has been its reliance on cotton, whereas the global market is shifting toward man-made fibers. Bangladesh has been more flexible in adapting to market demands, strengthening its export base with government support, and building strong global brand networks.
Indian entrepreneurs and policymakers are now shifting focus to larger-scale industrialization, aiming to take advantage of the “China +1” strategy, which could attract more international buyers. Experts warn that Bangladesh must remain vigilant and improve its efficiency, policies, and infrastructure to maintain its competitive edge in the global garment market.
For India to surpass Bangladesh, it will need to address labour cost issues, build a more unified and efficient textile ecosystem, and secure trade agreements that provide duty-free access to key markets. India’s diversified product range and focus on quality and sustainability could position it well in a global market that is increasingly moving away from fast fashion and toward ethical, high-quality goods.
In the long run, India’s strengths in innovation, technology, and infrastructure could prove decisive, but overcoming Bangladesh’s entrenched advantages will require sustained effort and strategic planning.
INTERESTING FACTS
Bangladesh: Bangladesh is currently the second-largest apparel exporter globally, after China, with exports valued at $45 billion (2022-23) from Ready-Made Garments (RMG) alone.
India: India is the sixth-largest apparel exporter, with exports of approximately $17.5 billion in the fiscal year 2022-23.
- Growth Rates:
Bangladesh: Bangladesh’s apparel sector has grown at an average rate of around 6-8% per year over the last decade, driven by low labor costs and a focus on Ready-Made Garments (RMG).
India: India’s apparel export growth has been slower, around 3-5% annually. However, India has been diversifying into value-added garments and technical textiles.
- Competitive Advantages:
Bangladesh: Low-cost labor, duty-free access to major markets like the EU and Canada (under the LDC status), and specialization in RMG have helped Bangladesh maintain its edge.
India: India has a more diversified textile industry, encompassing the entire value chain from fiber to fashion. Additionally, India’s large domestic market, skilled workforce, and increasing investment in automation and sustainability offer long-term competitive advantages.
Risks for Bangladesh:
- Graduation from LDC: Bangladesh is expected to graduate from Least Developed Country (LDC) status by 2026. This will lead to the loss of preferential market access to the EU and other countries, potentially eroding its competitive edge.
- Labour Cost Increases: Bangladesh’s labour costs are gradually rising, while India has a more balanced cost structure due to regional variations and skilled labuor pools.
Indian Textile Giants’ Expansion:
- India is now implementing large-scale industrialization and expanding its global operations.
- Indian businesses aim to move toward high-end, value-added garments based on their capabilities and strong fashion design skills.
- Indian entrepreneurs like Raymond are shifting production from Bangladesh to India, leveraging political instability in Bangladesh.
- The ‘China +1 strategy’ offers India new opportunities to attract global buyers.
