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 percent in the previous fiscal year even as India’s overall exports contracted 7 percent 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 percent), Indonesia (21.7 percent) and Brazil (7 percent), apart from Bangladesh.
While the U.S. (USD 51.6 billion) remained India’s top export destination, China (USD 21.2 billion) became the second biggest export market, surpassing the United Arab Emirates (USD 16.7 billion). However, it is Bangladesh that raced ahead of countries such as Singapore (USD 8.7 billion), the UK (USD 8.2 billion), Germany (USD 8.1 billion) and the Netherlands (USD 6.5 billion). Even Nepal (USD 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 (USD 1.5 billion), electricity (USD 517 million), fuel (USD 496 million), rice (USD 354 million) and corn (USD 328 million).
Unlike India, Bangladesh avoided a recession in 2020 even though its gross domestic product (GDP) growth slowed down to 2.4 percent from 8.2 percent a year ago because of the pandemic.
The World Bank has projected its economy to gradually recover from growing at 3.6 percent in 2021 and 5.1 percent in 2022 as private consumption, the main engine of its growth, is supported by normalizing activity, moderate inflation, and rising readymade garments exports.
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 percent of its manufacturing GDP and 85 percent 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.