The Indian government's decision to open up the floodgates for clothes manufactured in Bangladesh will likely force the closure of several garment and textile units that employ more that 35 million people across Tamil Nadu, Punjab, West Bengal Andhra Pradesh and Maharashtra, Confederation of Indian Textile Industry (CITI) has warned.
Prime Minister Manmohan Singh, during a trip to Bangladesh last month, announced that quota restrictions of 10 million pieces, imposed for decades on duty free exports of garments to India, will be lifted.
"Many Indian small local manufacturers will not be able to compete with Bangladesh's garment industry. This will adversely impact not only garment manufacturers, but also India's thriving fabric industry and force closure on many units," Shishir Jaipuria, chairman, CITI, told Hindustan Times.
CITI is an apex industry chamber representing India's textile industry.
While the deal to offer Bangladeshi textiles zero-duty access has been termed as a "game changer" for the small nation located on India's eastern border, the domestic industry is of the view that small units cannot match up to Bangladesh's apparel manufacturing competitiveness due to several factors including low labour costs.
"Labour cost is one of the chief components of total cost in apparel manufacturing. Bangladesh's labour cost is about a third of the wages paid to a garment worker in India," Jaipuria said.
Since 2005, India's apparel exports increased by 5% annual from $8.6 billion (Rs 39,000 crore) to in 2005-06 to $12.5 billion in 2010-11 (Rs 57,000 crore). Bangladesh's garment exports during the same time grew 18% from $7.9 billion in 2005-06 to $17.9 billion in 2010-11.
Jaipuria said the products to which Bangladesh has been offered duty free access are also major products for India's domestic production and consumption.