New Delhi [India], August 8 (ANI): Recent political upheavals and social unrest in Bangladesh, which is the second largest exporter of readymade garment, present an opportunity for the Indian garment makers, asserted CareEdge Ratings in a report.
China is currently the largest exporter of readymade garments. Bangladesh has over the years been able to take a large of part of the readymade garment market share and provided employment to millions. Many global clothing companies have shifted their manufacturing base to Bangladesh, primarily because of low labor costs and a skilled workforce.
Countries such as Bangladesh and Vietnam captured a large part of China’s declining share in the global readymade garment exports while India failed to adequately capitalise on China’s losing share, the rating agency said in a report dated August 8.
If political instability and social unrest prolong in Bangladesh, around 10 per cent of Bangladesh’s readymade garment export orders could shift and this, CareEdge believes, can present monthly export opportunities to the tune of USD 200-250 million in the near term and USD 300-350 million in the medium term.
The global readymade garment trade was pegged at around USD 550 billion during 2023.
Despite its declining share, China still dominates the global trade with over 30 per cent share in its exports.
According to the rating agency report, Bangladesh occupied the second position with around 8.5 per cent market share in 2023.
“Bangladesh’s share in global RMG trade has consistently increased during 2015-2023 largely at the expense of China. India remains a distant 7th in terms of global RMG trade with a market share of around 3-4 per cent during this period,” CareEdge report read.
Post Covid-19 pandemic, India’s readymade garment exports grew in 2021-22 and 2022-23, however, they declined in 2023-24 as global retailers and brand owners liquidated excess inventories and delayed purchases amidst high inflation in Europe and the US along with rising interest rates globally, the report said.
During 2023-24, Bangladesh’s garment exports were around 3.2x of Indian exports. However, during Q1-2024-25 this ratio narrowed down to around 2.5x reflecting India eating into the share of Bangladesh, claimed the report.
“Apart from the impact of socio-political upheavals in Bangladesh, this was also aided by various initiatives to enhance the competitiveness of Indian RMG (readymade garment) exports.”
The socio-political uncertainties prevailing in Bangladesh may result in global readymade garment brands and retailers with a significant presence in Bangladesh diversifying their sourcing for meeting their delivery schedules, especially if the crisis persists for more than a quarter or two.
“In such a situation, India is expected to gain around 6-8 per cent of Bangladesh’s monthly export orders in the near term and around 10 per cent of monthly export orders in the medium term (also aided by various government initiatives) translating into monthly incremental export opportunity of around USD 200-250 million in the near-term and USD 300-350 million in the medium-term.”
CareEdge believes India has enough headroom to increase garments exports by 20-25 per cent given the available capacities in the sector.
Bangladesh is facing a fluid political situation with Sheikh Hasina tendering her resignation from her post in the wake of mounting protests on August 5. A day after Sheikh Hasina resigned as Bangladesh PM and left the country, Mohammed Shahabuddin announced the dissolution of the country’s parliament to make way for the formation of an interim administration.
Members of the interim government led by Nobel laureate Muhammad Yunus will take the oath tonight. Bangladesh Army chief General Waker-Uz-Zaman said on Wednesday that the oath-taking ceremony is likely to be held at 8:00 pm (local time) in the presence of some 400 dignitaries, Daily Star reported. (ANI)
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