SBI Research Report
After the interim deal between India and America, Bangladesh also signed a deal with America, in which the US reduced the tariff rates on Bangladesh by 1 percent and said to impose zero percent tariff on American cotton. After this deal, it was feared that India’s textile exports would suffer huge losses. But now a report has come from SBI Research on this, which has turned milk from milk into water.
According to the report of SBI Research, the recent trade agreement between America and Bangladesh is not expected to have any significant impact on India’s export competitiveness. Allaying concerns about possible loss in market share, the report said the US-Bangladesh deal is not as big a deal as it is made out to be and there is not going to be as much loss as the cost dynamics and product composition remain in favor of Indian exporters.
Bangladesh and India’s deal with America
Where US has reduced the reciprocal tariff on Bangladeshi goods from earlier 20% to 19%. At the same time, India has achieved a huge reduction of up to 18% under its interim agreement with Washington. Although the US imports about $7.5 billion worth of textiles from both India and Bangladesh, the product mix is different.
The US buys more non-knitted clothes from Bangladesh, while India dominates other made-up textiles. The US-Bangladesh deal has a special clause that allows zero-tariff access for certain textile and clothing products made from US cotton and man-made fibres. This has raised fears that Bangladeshi exports may become more competitive in the American market.
India will not suffer any loss
The report says that the higher cost of sourcing raw materials from the US compared to India will prevent any major changes. SBI Research said that the cost of importing from US will be much higher than importing from India, hence this will not reduce India’s competitive advantage. The report also examines the possible indirect impact on India through cotton and fiber exports to Bangladesh. Currently, Bangladesh imports cotton worth about $2.7 billion from India, which is about 31% of its total cotton imports, while man-made fiber imports from India are about $119 million, which is about 6% of Bangladesh’s total imports.
India’s deal is better than Bangladesh’s
If we directly compare the deals between India and Bangladesh with America according to facts, then India appears to be much ahead of Bangladesh. The biggest difference is in tariff cuts. Tariff on India’s exports has come down from 50% to 18%, which is a huge reduction, whereas for Bangladesh it has come down from 20% to only 19%. Apart from this, India’s deals are spread across many sectors, which include industrial goods, agricultural products, energy and technology. India also has a larger scale in terms of purchase commitments, as India has expressed its intention to purchase approximately $500 billion of American energy, IT, coal and other products, whereas Bangladesh’s total purchase commitment is much less.
Additionally, India is moving towards separate detailed negotiations on digital trade rules, which could provide long-term strategic benefits. Bangladesh’s deal, on the other hand, mainly focuses on textiles, some agricultural products and limited procurement. Overall, in terms of size and economy, India’s position appears stronger and broader in this agreement.
US-Ban Vs Us India
EU trade deal will be helpful
After the trade deal, a data went viral that America’s offer to Bangladesh to impose zero tariff on buying US cotton would cause huge loss to India because India exports a lot to Bangladesh. This claim is not factually as accurate as it appears. SBI Research estimates that even if the situation becomes very bad, India will suffer a loss of only about $1 billion. According to the report, if US cotton replaces 10% of our cotton exports and 2% of our man-made fiber exports to Bangladesh, then India will suffer a loss of only $1 billion.
But this loss will be easily compensated as India’s recent free trade agreement with the European Union has opened up an approximately $260 billion textile market with zero duty access, which can significantly mitigate any marginal impact of Bangladesh getting preferential terms in the US.
Trade Data
India’s GDP will increase
According to the report, India’s interim trade agreement with the US makes the country one of the Asian exporters to the US with the lowest tariffs, which will bring back competitiveness in key sectors like textiles, leather, chemicals, gems and jewellery, engineering goods and seafood. SBI Research says that after the deal, India’s goods exports to the US may cross $100 billion annually and the bilateral trade surplus is likely to exceed $90 billion, which will lead to a net increase of about 1.1% in GDP.
Also read- India-US Trade Deal: India’s trumpet rang across Asia! China-Vietnam are all behind, taxes are now lowest
