India’s move to introduce rules of origin to protect its garment manufacturers might hurt Bangladesh’s exports to India. However, it will not be easy for India to impose any condition on duty-free facility as Bangladesh enjoys the trade benefit in India under the South Asian Free Trade Agreement.

Although India doubled import tax on more than 300 textile products to reduce its cheap imports from China, the Indian textile industry says due to the duty-free facility offered by India to Bangladesh, China is exporting textiles to India through Bangladesh. The industry had asked for rules of origin for duty-free imports.

Competition from China is forcing some Indian businesses, such as polyester production facilities, to run idle, leading to job losses. India is considering a fabric forward policy, where duty-free access to garments would be provided if the fabric is sourced from India.

Bangladesh says if India imposes conditions on duty-free market access on its products, Indian products would also have to face the same restriction in Bangladesh. India’s total textile imports jumped 16 per cent in fiscal year upto March 2018. Of this, about $3 billion were from China. Duty-free fabric from China comes to Bangladesh, gets converted and lands in India at zero duty.