• CCI AD FROM 5th April 2021

INDO-SAARC

INDO-SAARC TRADE

Introduction

In an era of growing regional cooperation, economic integration and common markets worldwide, South Asia stands out as a region which is among the least integrated. The commonly held view is that the region’s complicated political economics, deep burdens of history, powerful protectionist lobbies, a maze of opaque rules, negative lists, and slew of para-tariffs and non-tariff barriers prevent a freer flow of information, investment, goods and people, which are needed to realize a dynamic regional market across South Asia.

In spite of the host of  regional cooperation and trade agreements under various stages of implementation, like the South Asian Association for Regional Cooperation (SAARC), the South Asian Preferential Trading Arrangement (SAPTA), the Bay of Bengal Initiative for Multi-Sectoral Economic Cooperation (BIMSTEC) which involves  Bangladesh, India, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan) and the South Asian Free Trade Area (SAFTA) the potential of an integrated trade, investment and production, which is promised by region’s geography and its complementary comparative advantages promise, still remains yet to be translated into reality.

Despite the growing competitiveness of Textiles & Clothing trade in the SAARC region, there is a very little interlinkage within South Asia’s textile and clothing industry. There is growing evidence of widespread substitution of South Asia by East Asia, as the sourcing hub of fabric and accessories by the region’s major clothing exporters. Over 80% of fabric required by Bangladesh and Sri Lanka are sourced from outisde the region, in spite of the fact that India and Pakistan are net exportrs of textiles. This means that Bangladesh and Sri Lanka are sourcing their requirements of fabrics from countries outside the SAARC region. Thus, though India and Pakistan are within the SAARC region, they are not among the preferred sourcing suppliers for fabrics required by Bangaldesh and Sri Lanka.

In spite these barriers, there is growing evidence that with recent shifts in the nature of textile and clothing industry, especially post-MFA, as well as changing intra-regional dynamics there are emerging possibilities for cooperation and collective action in the region. The drivers of this potential lie in the growing importance of the domestic market and the rise of organized retail in South Asia, the rise of new generation of younger entrepreneurs in South Asia who are increasingly professional, globally aware and schooled in a shared cultural worldview that helps cuts across traditional barriers of region and history the emergence of new knowledge networks and an interpenetrated regional labor market in skills in the South Asian garment industry and possibility of leveraging strategic regulatory shifts and upcoming ‘demands for structural change’ post-2008 to foster greater regional cooperation.

INDIA’S TEXTILE TRADE WITH SAARC COUNTRIES

Value in USD Mn

Sr. No.

Countries

2011-12

2012-13

2013-14

Export

Import

Trade Balance

Export

Import

Trade Balance

Export

Import

Trade Balance

1

Bangladesh

1243.90

238.02

1005.88

1742.48

234.49

1507.99

1896.29

168.50

1727.79

2

Pakistan

191.59

71.47

120.12

644.45

80.40

564.05

637.61

65.96

571.65

3

Sri Lanka

458.94

41.89

417.05

436.03

42.32

393.71

506.91

50.14

456.77

4

Afghanistan

143.12

0.11

143.01

150.68

0.30

150.38

203.84

0.32

203.52

5

Nepal

99.48

2.75

96.73

100.68

2.84

97.84

108.74

74.52

34.22

6

Maldives

3.29

0.00

3.29

3.24

0.00

3.24

4.02

0.00

4.02

7

Bhutan

0.37

0.12

0.25

0.34

0.08

0.26

0.67

0.02

0.65

Source: Dept of Commerce

India’s MMF Textiles Trade with SAFTA Countries

Value in USD MN

Sr. No.

Countries

2011-12

2012-13

2013-14

Export

Import

Trade Balance

Export

Import

Trade Balance

Export

Import

Trade Balance

1

Bangladesh

128.91

11.41

117.50

173.91

8.27

165.64

233.79

17.28

216.51

2

Afghanistan

137.69

0.00

137.69

146.60

0.00

146.60

188.40

0.00

188.40

3

Pakistan

101.32

1.76

99.56

162.58

1.59

160.99

149.18

2.08

147.10

4

Sri Lanka

119.59

36.83

82.76

116.04

38.12

77.92

132.33

46.25

86.08

5

Nepal

22.84

94.35

-71.51

26.18

61.48

-35.30

30.45

46.86

-16.41

6

Maldives

1.07

0.00

1.07

0.88

0.00

0.88

2.37

0.00

2.37

7

Bhutan

 0.0

0.10

-0.10

0.19

0.08

0.11

0.09

0.02

0.07

Source: DGCI&S

The Structure of the Textiles and Clothing Industry in South Asia

Textiles and clothing (T & C) is South Asia’s largest manufacturing sector, a major employer and leading export sector. In 2013, South Asia exported over $5317 million in clothing and textiles, a 6% share in the global T&C market. The region’s T&C industry collectively employed over 55 million people directly and nearly 90 million indirectly in 2005. This included an estimated 38 million in India, 15 million in Pakistan, 2 million (8 million indirect) in Bangladesh, 300000 (1.5 million indirect) in Sri Lanka and over 200,00 in Nepal.

Exports of Clothing and Textiles from South Asia in 2013

 

Textiles

Clothing

Total

Share of Textiles

Share of Clothing

India

3461334

179887

3641221

95%

5%

Pakistan

796496

7882

804378

99%

1%

Bangladesh

174502

21136

195638

89%

11%

Sri Lanka

529635

146658

676293

78%

22%

Total

4961967

355563

5317530

93%

7%

Source : UN Comtrade

  • SAARC can play an important role in sustaining high growth rates in the region in future.
  • Trade within SAARC can be increased substantially by diversifying the trade by increasing competitiveness by obtaining less expensive and better quality inputs from neighboring countries.
  • However, SAARC countries have maintained very high level of protection within the region, which has affected trade adversely.