Indian banks discourage importing Bangladeshi goods

by Staff Reporter
September 12, 2011

http://www.weeklyblitz.net/1792/indian-banks-discourage-importing-bangladeshi

Not even a week after the banged trip of Indian premier Dr. Manmohan Singh to Bangladesh and signing of a number of protocols including according Bangladesh the duty-free access of 46 textile items as well as 15 non-textile items, Indian financial institutions are already "suggested" by the central government not to encourage the importers in opening letter of credit for the import of textile products from Bangladesh, as "more than two hundred thousand people manufacturing apparel in five thousand factories are already fearing tremendous adversity" following the signing of the trade protocol by Dr. Singh.

Commenting on the treaty, Ajit Lakra from Export Committee Chamber of Knitwear and Textiles Association of India told The Times of India, "Ludhiana is the worst affected as it manufactures jeans, garments and sweaters, which can now be exported to India without any duty. While we will see Ludhiana in ruins, the big brands are likely to take the foreign direct investment route to set up their units in Bangladesh. This will destroy the Indian textile industry."

He said "Bangladesh has a cost advantage due to at least 50 percent cheaper labour, duty free availability of manufacturing machinery and raw material, apart from superior workmanship."

Varun Jain from Ludhiana-based Vallabh Fabric told The Times of India, "Retail companies that source material from Ludhiana have already started exploring import possibilities from Bangladesh."

Narinder Miglani of Ludhiana said, "As against Bangladesh, government of India imposed 10 percent duty in this budget on branded clothes without giving concessions on machinery and raw material import. Bangladesh has already become the second largest exporter of apparel in the world after China. India has been relegated to a poor third position, with an export volume hovering around 12 billion dollars. Bangladesh has earned around 18 billion dollars through exports. Even China won't be able to match the price advantage of Bangladesh as far as export of textile products to Indian market is concerned."

Textile experts as well as specialists on foreign investment in India said, the recent treaty signed by Dr. Manmohan Singh in other words turns Bangladeshi textile sector into one of the prime centers of interest of international investors, as now, multi-million dollar factories will be established in Bangladesh, mostly by foreign investors, eyeing the multi-billion dollar textile market in India.

They fear Indian textile sector will face a tremendous setback during the coming winter season, when local demand of sweaters and denims will cross the amount of US$ 1billion. "Indian superstores selling brand items will soon be flooded with apparels made in Bangladesh", they said.

Meanwhile, to "safeguard" the Indian apparel manufacturers, the finance ministry has reportedly conveyed secret suggestions to Indian financial institutions in either delaying every application for opening letter of credit for textile items from Bangladesh, or to even refuse most of such applications showing technical grounds.

Indian news media has already started negative propaganda against according duty-free access to Bangladeshi textile products to India.

Times of India, in an interview based item titled 'Will spell disaster for industry' quoted Sanjeev Gupta, the president of Apparel Park, who also is the managing director of Kuvam Fashions saying, "We are yet to get the final print of the agreement to know the exact list of garments allowed duty free entry into the country and the clarification regarding exact rebate on the excise and sales tax duty on these garments and the quantative restriction, if any. However, one thing is very clear that this move is not in the right direction for textile industry. It will spell disaster for the already ailing industry."

Sanjeev Gupta said challenge for Indian textile sector, following the recent duty-free access granted to Bangladeshi textile products will be "devastating and much severe as compared to China", as the distance between Kolkata and North-Eastern states in India are much lesser in compared to distance with Ludhiana.

Commenting on Bangladeshi textile sector Pawan Garg director, Ram Krishna Knitters Private Limited, said the government has failed to check the rising interest rates on working capital loan for exports which has shot up to 12 percent per annum now from 7 percent per annum in 2010. "As a matter of fact, we are no where in a position to take on the stronger textile industry of Bangladesh. They will soon sweep us aside. An industry that does not even have regular power supply and proper labour laws can not compete with the Bangladeshi counter-industry which has liberal labour laws along with the advantage of cheap labour," Garg added.

"Compared to our exports of US$12 billion, the much smaller country Bangladesh registers exports worth US$15 billion. Our industry is in no position to face such stiff competition," said Sudarsh Jain, managing director of Sarjeewan Knitwear who is also the president of Knit Wear and Apparel Manufacturers Association of Ludhiana.

While Indian textile manufacturers are voicing against the treaty signed by Dr. Manmohan Singh giving Bangladesh duty-free access of 46 textile items, China, which is another giant market in Asia and is three times bigger than Indian demand, is actively considering according special benefits to Bangladeshi textile and non-textile items, so that the later can enter the Chinese market in a bigger way.

Related Topics:  International News receive the latest by email: subscribe to weekly blitz's free mailing list