• 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 marks and Bangladesh’s export to India will close near $900 million, riding primarily on ready-made garments.
• Though India offered duty-free and quota-free entry to Bangladesh goods under the SAFTA (South Asian Free Trade Area) agreement in 2011, Dhaka was slow in taking advantage of the facility, as their export to India grew from $512 million to $672 million over the last six years.
• During the past 11 months, Bangladesh’s garment export to India increased by 113 percent from $129 million.
• Add to this footwear, fish, beverages etc and India’s imports from Bangladesh increased by 30 percent since July 2017.
• The introduction of GST in July 2017, led to the withdrawal of 12 percent countervailing duty on textiles. The withdrawal of CVD was not specific to Bangladesh neither Bangladesh is the only beneficiary.
• But it sure came as an advantage for Bangladesh, which is the 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 the attention of Confederation of Indian Textile Industry, which pointed out that it will open a floodgate 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 are absent in SAFTA. The loophole may be used for diversion of Chinese man-made fiber based garment through Bangladesh.