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The Bangladeshi financial year 2017-18 (July-June) might prove to be a landmark in bilateral trade relations. For the first time trade is set to cross $9 billion mark and Bangladesh’s exports to India will close near $900 million, riding primarily on ready-made garments, according to sources.
Though India offered duty-free and quota free entry to Bangladesh goods under the (South Asian Free Trade Area)SAFTA agreement in 2011, Dhaka was slow in taking advantage of the facility, as their exports to India grew from $512 million to $672 million over the last six years.
During the past 11 months Bangladesh’s garment exports to India increased by 113 per cent from $129 million to $276 million.
Add to this footwear, fish, beverages etc and India’s imports from Bangladesh increased by a 30 per cent ($201 million) since July, 2017.
GST benefits
The introduction of GST in July 2017, led to withdrawal of 12 per cent countervailing duty (CVD) on textiles. The withdrawal of CVD was not specific to Bangladesh neither Bangladesh is the only beneficiary.
But it surely came as an advantage for Bangladesh, which is world’s second largest exporter of ready-made garments. The competitive edge should increase with the recent hiking of import duty on 328 textile products, which is not applicable to Bangladesh.
The sharp rise in imports from Bangladesh attracted attention of Confederation of Indian Textile Industry (CITI), which pointed out that it will open a flood gate if India doesn’t amend the FTA, which was entered without sufficient rules of origin safeguard.
Normally FTA’s include minimum value addition criteria which is absent in SAFTA. Sanjay Jain, president of (CITI) is apprehensive that the loophole may be used for diversion of Chinese man-made fibre based garments through Bangladesh.
Shaquib Quoreshi, enterpriser at Dhaka-based Business Intelligence Limited said that the minimum value addition criteria may be added in the FTA. But such amendments can be reached only through consensus at the SAARC ministerial.
However he rules out any immediate worry for India.
Quoting a study by ADB’s SASEC programme, Quoreshi said Bangladesh had distinct cost advantage vis-a-vis Indian imports in 49 garment items.
The GST related benefits should help Bangladesh grab a higher share of Indian imports by replacing other destinations.
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