Bangladesh Unrest Costs Gujarat Billions: $3 Billion in Spices, $500 Million in Textiles

Bangladesh is currently experiencing unrest, causing significant disruption to India’s spice and textile industries. India has a $16 billion trade relationship with Bangladesh, including $13 to $14 billion in exports from India and only $2 billion in imports from Bangladesh. Gujarat’s major industries, such as textiles and spices, are particularly affected, as Gujarat leads the country in the production of fabrics and spices. Surat, known for its textile industry, could see a $500 crore impact, while the spice trade might be affected by $3000 crore. However, traders suggest that these industries might benefit in the long run.

Potential Long-Term Benefits for India 

The crisis in Bangladesh could offer long-term benefits for Indian industries, as goods previously exported to Bangladesh may now be redirected to other countries. This shift could boost India’s trade with other nations. India’s spices are in high global demand, and Bangladesh is the fourth largest importer of Indian chili. Additionally, India exports significant quantities of spices to China, Malaysia, and Thailand.

Gujarat’s Spice Exports 

India exports spices worth $9,000 crore annually to Bangladesh, including chili, turmeric, cumin, sesame seeds, and psyllium. Mainly, chili is exported from Andhra Pradesh and Telangana, while Gujarat leads in cumin, sesame, and psyllium production. Gujarat exports spices worth $2,500 to $3,000 crore to Bangladesh each year.

Spice Trucks Stranded at the Border 

Hiren Gandhi, Secretary of the Indian Spice Exporters Federation, reported that the trade in spices with Bangladesh amounts to about $9,000 crore annually. Recently, there has been a noticeable decline in orders from Bangladeshi traders. As a result, around 40 to 50 trucks with goods destined for Bangladesh are stuck at the port, unable to enter the country due to customs restrictions. Additionally, over 150 trucks en route to Bangladesh are stranded at the border, and transactions are also being delayed due to the closure of Maharashtra’s central bank.

Long-Term Advantages for India Despite Current Losses 

Gandhi noted that although the current situation poses challenges, there could be long-term benefits for India. If Bangladesh’s new government does not support import-export activities as previous administrations did, major traders might consider shifting their business to India. Despite the short-term losses, estimated at around $500 crore, the Indian textile industry could gain from the shift in trade dynamics.

Impact on Surat’s Textile Industry 

Surat’s textile industry has established a global reputation and is a major employment provider after agriculture. Changes in the textile industry significantly impact the livelihoods of many. The current political turmoil in Bangladesh could present Surat’s textile industry with new opportunities.

Bangladesh’s Growing Garment Manufacturing Hub 

Under Bangladesh’s textile policy, the garment industry has expanded significantly. Despite its smaller size compared to developed countries like India, Bangladesh’s garment sector is growing rapidly. Today, Bangladesh is a leading manufacturer of ready-made garments, second only to China. The country’s textile policy, including textile parks, has contributed to this growth.

Robust Textile Park Infrastructure in Bangladesh

Bangladesh has developed a strong infrastructure for textile parks, where over 10,000 people can work in a single park. This approach is similar to China’s, where large parks are established for manufacturing. Bangladesh’s textile parks are thriving, much like China’s.

Short-Term Losses but Potential Long-Term Gains 

While Surat’s textile industry faces challenges due to the unrest in Bangladesh, there is potential for long-term benefits. Payments for exported fabrics have been delayed, and orders for upcoming festivals like Durga Puja have halted. Traders in Surat estimate short-term losses around $500 crore but believe that long-term gains could be significant if countries currently trading with Bangladesh shift their business to India.

Political Instability May Provide Opportunities 

Political stability is crucial for industrial development. The instability in Bangladesh might lead countries that currently trade with Bangladesh, such as European countries and Vietnam, to seek alternatives, potentially favoring India.

Shift in Perspective for Branded Manufacturing Companies 

Global branded manufacturing companies operating in Bangladesh might reconsider their investments due to political instability. India could become an attractive alternative for these companies, potentially leading to increased investment in cities like Surat.

Surat’s Leading Position in Synthetic Fabrics 

Surat is a major global producer of synthetic fabrics, second only to China. The city’s dominance in synthetic fabric manufacturing positions it well for growth in the garment industry. Competition from China and Bangladesh is significant, but Surat’s synthetic fabric exports to Bangladesh are substantial.

Opportunities Arising from Crisis 

Kailas Hathi, President of the Federation of Surat Textile Traders Association, stated that while the current instability in Bangladesh poses a significant challenge, it could also provide opportunities for Surat’s textile industry. Political instability in Bangladesh might prompt companies to explore alternatives, potentially benefiting Indian industries.

Bangladesh’s Limited Fabric Production 

Hathi added that Bangladesh does not manufacture its own fabric, focusing solely on garment production. If a significant portion of garment manufacturing in Bangladesh were to shift to India, it could result in substantial benefits for India.

Need for Anti-Dumping Duties 

Textile industry expert Lalit Sharma advocated for the imposition of anti-dumping duties on imports from Bangladesh, a demand that has been pending for years. Many synthetic fabrics imported from Bangladesh are produced in Surat, and branding companies often use Bangladesh for job work, with garments exported to other countries.

Infrastructure Challenges 

India, particularly Surat, faces challenges in scaling up its garment industry due to inadequate infrastructure. Unlike Bangladesh and China, which have large-scale textile parks, Surat’s limited number of composite units (about 25) and the smaller scale of operations could hinder its ability to fully capitalize on large orders.

Urgent Need for Policy Reforms 

Sharma emphasized the need for urgent reforms in India’s textile policy to seize emerging opportunities. Effective infrastructure development is crucial to leverage the potential growth in the garment industry.