India's yarn exports a concern for Bangladesh mills as RMG sector benefits
As Bangladesh's garment manufacturers increasingly turn to India for cheaper yarn, boosting growth of their ready-made garment (RMG) industry, Bangladesh's domestic yarn manufacturers are concerned about their own survival.
BTMA concerned about India’s cost advantage
India's competitive pricing, with yarn available at $2.77 per kg compared to $3.30 in Bangladesh, has made it an attractive source for cost-conscious garment manufacturers. This significant cost advantage is prompting many Bangladeshi garment manufacturers to look to India for their yarn needs. While this strategy may offer immediate cost savings, it raises concerns about the long-term viability of the Bangladeshi textile industry. The Bangladesh Textile Mills Association (BTMA) warns of the long-term consequences for the domestic spinning mills, many of which are on the brink of closure.
The BTMA attributes this growing reliance on Indian yarn to unfavorable trade policies and the withdrawal of export incentives, which have inflated the cost of domestically produced yarn. Coupled with the ongoing energy crisis, these factors have forced mills to operate at half capacity, further driving up production costs. The BTMA warns that many local spinning mills are on the brink of closure, unable to compete with the cheaper Indian imports. The withdrawal of export incentives and cash support by the Bangladesh Bank, along with the ongoing energy crisis, has further exacerbated the situation.
Bangladesh economists caution depending on foreign sources for crucial raw materials like yarn could jeopardize Bangladesh's RMG industry, which is the backbone of its exports. They urge the government to implement incentives for domestic yarn production to safeguard the garment sector and reduce its vulnerability to fluctuations in the global market.
Gains for Indian mills
From the Indian perspective, this increased demand for yarn is a positive development, offering a growing market for their products. However, the concerns raised by the BTMA highlight the potential negative impact on the Bangladeshi textile industry. If local mills are forced to shut down, it could lead to job losses and a reduction in the overall production capacity of the country.
While India's yarn exports are supporting Bangladesh's booming garment industry, the situation underscores the challenges faced by the domestic yarn producers. The BTMA's concerns highlight the need for Bangladesh to strike a balance between cost-efficiency and supporting its domestic textile industry to ensure the long-term sustainability of its RMG sector.