India’s Cost Advantage Threatens Bangladesh’s Textile and Garment Industry Dominance

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Abdullah Mohammad Talha, Managing Director, of Noman Terry Towel Mills Limited

In recent times, the textile and garment industry in Bangladesh is facing a significant challenge as India emerges with a higher cost advantage, threatening to secure a larger share of the global market. Abdullah Mohammad Talha, Managing Director of Noman Terry Towel Mills Limited, has expressed concerns about the future competitiveness of Bangladesh due to several factors favoring India.

One of the critical factors contributing to India’s advantage is the strengthening relationship between India and the West. This alliance has put Bangladesh in a chokehold, hindering its ability to attain strong competitiveness and escape the middle-income trap. Unlike Bangladesh, India has diversified its assets and resources, allowing it to have a multifaceted approach to economic growth.

One of the pivotal elements that have given India an edge is its relatively cheaper labor force. While Bangladesh initially held an advantage in this regard, it has seen a gradual increase in its labor costs. Presently, the pay structure in Bangladesh is comparable to India, with garment helpers earning around USD 150 per month, while operators receive up to USD 180 per month.

Bangladesh’s dependence on cotton, manufactured, and synthetic raw materials imports from India further contributes to its cost disadvantage. India, with a robust manufacturing base, retains most of its export earnings, unlike Bangladesh, which has to allocate a significant portion of its earnings to pay foreign suppliers for raw materials.

Furthermore, India’s textile and garment companies benefit from access to cheaper finance due to a well-established stock exchange market. In contrast, Bangladesh faces higher interest rates, making it less competitive in the global market compared to countries like Vietnam and India.

Electricity costs also play a significant role in India’s cost advantage over Bangladesh. While India enjoys electricity from the grid at a rate of approximately 7 cents per kW, Bangladesh faces significantly higher costs, at around 12.7 cents per kW. This, along with a lack of uninterrupted power supply, has led many textile factories in Bangladesh to face operational challenges.

Another issue affecting Bangladesh’s competitiveness is the exchange rate policy. The country faces a double standard with the USD1 being equivalent to BDT 107.5 for exports but BDT 109 for imports. This disparity puts immense strain on exporters, as they must purchase goods at higher costs and sell them for lower returns.

In light of these challenges, Abdullah Mohammad Talha urges all stakeholders in Bangladesh to take proactive measures, including sound policies and the elimination of corruption, to retain the industry’s growth and strength. Without decisive action, Bangladesh’s textile and garment industry may struggle to maintain its dominant position in the global market, while India continues to gain momentum in securing a higher share in the coming days.