News
Bangladesh boom fuels Indian exports
Summary
Exports to Bangladesh grew 11% in the previous fiscal year even as India’s overall exports contracted 7% because of the pandemic, according to government data.NEW DELHI : Bangladesh jumped four notches to become India’s fifth-largest export destination in the year ended 31 March as exports to many of the nation’s traditional markets shrank because of the pandemic while its eastern neighbour continued to report economic growth.
Exports to Bangladesh grew 11% in the previous fiscal year even as India’s overall exports contracted 7% because of the pandemic, according to government data.
Bangladesh has experienced an unprecedented economic transformation over the past decade and is set to surpass India in terms of per capita income.
India’s exports to most of its key destinations contracted as the coronavirus pandemic disrupted supply chains. Among the country’s top 20 export destinations, shipments grew only to China (27.5%), Indonesia (21.7%) and Brazil (7%), apart from Bangladesh.
While the US ($51.6 billion) remained India’s top export destination, China ($21.2 billion) became the second biggest export market, surpassing the United Arab Emirates ($16.7 billion). However, it is Bangladesh that raced ahead of countries such as Singapore ($8.7 billion), the UK ($8.2 billion), Germany ($8.1 billion) and the Netherlands ($6.5 billion). Even Nepal ($6.8 billion) jumped a notch to become India’s ninth-largest export market.
In FY21, India’s top export items to Bangladesh were cotton and cotton yarn ($1.5 billion), electricity ($517 million), fuel ($496 million), rice ($354 million) and corn ($328 million).
Unlike India, Bangladesh avoided a recession in 2020 even though its gross domestic product (GDP) growth slowed down to 2.4% from 8.2% a year ago because of the pandemic. The World Bank has projected its economy to gradually recover from growing at 3.6% in 2021 and 5.1% in 2022 as private consumption, the main engine of its growth, is supported by normalizing activity, moderate inflation, and rising readymade garments exports.
Sanjay Kathuria, senior visiting fellow at the Centre for Policy Research, said the rise of Bangladesh as a sub-regional economic power is unambiguously good for India. “Its growing middle-class provides a big market for Indian agriculture and manufactured goods, as well as for services. The FY21 trade data is proof of this. In addition, Bangladesh is already the biggest source of medical tourists to India. Significantly, its increasingly ambitious private sector can be a major source of foreign direct investment in India’s North-East, and India’s northeastern states as well as the central government should be paying attention to this aspect of Bangladesh’s potential," he added.
India could immensely benefit from Bangladesh’s growth, said Nisha Taneja, a professor at the Indian Council for Research on International Economic Relations (ICRIER).
“India has for several years been a major supplier of cotton and cotton fabric for Bangladesh’s readymade garment industry. Bangladesh depends heavily on its readymade garments sector as it accounts for 45% of its manufacturing GDP and 85% of its exports. In 2021, Bangladesh’s readymade garments exports are expected to overshoot pre-covid levels. This sector was allowed to continue its operations despite the lockdown and was also able to absorb a major stimulus package given by the government. As a result, the sector has been able to quickly respond to rising global demand since July 2020, which may well be one of the major reasons for a quick economic recovery," she added.
India should also pay special attention to help Bangladeshi firms access India’s vast market, Kathuria said.
