There has been a rise in garment exports from Bangladesh to India. Before GST, Indian importers had to pay a countervailing duty of about five percent to seven percent, which drove up the costs of these garments. With GST having subsumed this duty, apparel from Bangladesh has become cheaper for Indian importers by five per cent to seven per cent. Also, Bangladesh has the advantage of having lower minimum wages than those in India. This has the effect of reducing the cost of production and making clothing cheaper. Another factor which makes Bangladesh competitive is the fact that it enjoys duty free imports of fabrics and garments from China. The availability of cheaper fabric, too, brings down manufacturing costs. Lastly, India has a lot of small production units and factories. So if retailers want to procure 1,00,000 pieces, they’ll have to source them from several Indian garment producers, whereas they can procure the same easily in Bangladesh by placing the order to one or two firms.
The US and the EU together comprise 65 per cent of the market for Indian apparel exporters. There’s also a lot of potential that can be tapped in Japan, Australia, South America and the Middle East.