A recent report by SBI Research has stated that the trade agreement between the United States and Bangladesh is unlikely to pose a significant threat to India's textile industry. The report highlights that India's export competitiveness remains intact due to favorable cost structures and a distinct product mix compared to Bangladesh. While concerns were raised following the US-Bangladesh deal regarding potential market share loss, the data provided by SBI Research suggests that the impact will be minimal and manageable for Indian exporters.
Comparative Analysis of Tariff Reductions
According to the SBI Research report, the United States has reduced tariffs on Indian goods from 50% to 18%, marking a substantial decrease that benefits Indian exports. In contrast, the tariff reduction for Bangladesh has been relatively minor, moving from 20% to 19%. This significant difference in tariff cuts positions India more favorably in the American market. 5 billion worth of textiles from both India and Bangladesh, the report notes that the product categories and market dynamics differ Notably between the two nations.
Product Mix and Market Specialization
The report emphasizes that the nature of textile exports from India and Bangladesh is distinct. The US primarily imports non-knitted apparel from Bangladesh, whereas India maintains a dominant position in the 'made-up textiles' segment. While the US-Bangladesh deal includes a specific clause allowing zero-tariff access for products made from US cotton and man-made fibers, SBI Research believes this doesn't pose a major threat. India's diverse product range and established supply chains provide a competitive edge that's difficult to displace through minor tariff adjustments.
Raw Material Costs and Supply Chain Dynamics
SBI Research analyzed the cost implications of raw material sourcing for Bangladesh. The report suggests that importing raw materials from the US would be Importantly more expensive for Bangladesh compared to sourcing from India. 7 billion. Even in a worst-case scenario where US cotton replaces 10% of Indian cotton exports to Bangladesh, the estimated loss to India would be around $1 billion, which is considered negligible in the context of total bilateral trade.
Strategic Advantage of the India-EU FTA
The report further points out that any potential minor losses in the US market would be offset by India's other international trade gains. The recent Free Trade Agreement (FTA) with the European Union has opened up a textile market worth approximately $260 billion for Indian exporters. Under this agreement, India enjoys zero-duty access to the EU market. SBI Research indicates that this access to the European market is more than sufficient to mitigate any competitive pressure arising from the preferential terms granted to Bangladesh by the United States.
Projected Impact on India's GDP and Exports
The interim trade agreement with the US positions India as one of the Asian exporters with the lowest tariff rates. This is expected to bolster competitiveness across various sectors, including textiles, leather, chemicals, gems and jewelry, engineering goods, and seafood. SBI Research estimates that India's goods exports to the US could exceed $100 billion annually following the deal. 1% to India's overall GDP.