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IJRAR1BJP102 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 671

TEXTILE AND CLOTHING EXPORTS FROM INDIA AND

BANGLADESH: A COMPETITIVE ANALYSIS THROUGH RCA

AND RSCA INDEX

Dr. Tawheed Nabi1 Sugandh Arora 2

Abstract

The present study focuses on the revealed comparative advantage and revealed symmetric advantage of the

Textile and clothing trade in India and Bangladesh and explores the various determinants that influence

competitiveness of India and Bangladesh in the international trade. For the analysis, secondary data has been

taken majorly from two sources viz; UN-Comtrade and World Trade Organization. The study has considered the

comparative advantage of India’s Textile and Clothing industry based on Balassa’s RCA indices. Various studies

have been prepared for India and Bangladesh, which has highlighted the number of items having comparative

higher RCA over the period of 2005-2018. The study has found the dynamics of the textiles with respect to other

nations in general and Bangladesh in particular. Through the analyses it has proved that India has more

comparative advantage in the Textile and Cotton sector in Bangladesh from 2005 to 2018.The study has used 2

–digit classification of harmonized system data of 14 main products over the period.

Keywords: Dynamics; Revealed Comparative Advantage; Textile and Clothing; Comparative Advantage

Countries; International Trade

Introduction

Historically, cotton and textile are one of the oldest export sectors and served as the starter for trade

competitiveness, especially in Asia (Abernathy et al. 2004). Textile and cotton industries play a crucial role in

the economic growth of the nation. In the beginning of 1980’s when liberalization, Globalization and privatization

were emphasized in India then Indian contribution towards world export was also improved which was earlier

suffering to limited liberalization because economy was tackled through socialist planned monetary system (Kim,

2019; Aluwalia,1995). As textile and cotton industry is labor intensive industry helps to government to reduce

the unemployment and poverty from the economy (Navy, 2018). Textile and cotton Industries are the primary

ground of development in the most Asian countries (Chen et al. 2017). According to WTO (2019), Bangladesh,

Vietnam, Hong- Kong, China and India are the top competitors of each other in Asian region. The major

destinations for exports depend upon the cost of production in the world markets. The opportunity for exporting

firms lies when the cost of production per unit in the foreign market is on the higher side.

1Assistant Professor, Mittal School of Business, Lovely Professional University, Punjab 1Research Scholar, Mittal School of Business, Lovely Professional University, Punjab

http://www.ijrar.org/



Most of studies focused on the trade competitiveness of India’s textile and cotton industries based on Revealed

comparative advantage. However, present study analyses the trade competitiveness between India and

Bangladesh which has extended the period from 2005-2018 based on RSCA and highlight the product which will

be served as roadmap for the further study.

Review of Literature

Gay Gereffi (2000) examined various barriers and obstacles faced by Indian cloth sector in trade competitiveness

and also, confirmed that share of India’s apparel in world export has not increased since 1994. Even reforms in

1990 policy have not impact significantly on the clothing sector. Verma (2000) lead a research toward Indian

Textile and Clothing Industries with post reforms and finds that India’s textile industry faced numerous

shortcomings even after the post period of 1947 due to the instability in government and its strategy. Yeats (2001);

Batra & Khan (2005); Chi (2006) and Murray (2007) analyzed the changes in trends due to the factor’s

endowments and competitive analysis of various countries. Murray (2007) stated that India and China have rapid

accumulation of physical capital from the last few years due to increasing growth rate of economies but human

capital seems lagged. Adams et al. (2006) showed that China’s competitiveness, which reflected the overall

improvement in capability to produce the goods that meet demand of world market. Monineath et al. (2016)

piloted the study by using computable general equilibrium model through GTAP and also employed the

quantitative method of RCA to analyze the competitiveness of textile and cotton garments in Cambodia. Kathuria

(2013) analyzed the trade competitiveness of Garment industry in India based on harmonized identification code-

2 and calculated the revealed comparative advantage and revealed symmetric advantage 61 and 62 item code.

Even Shahzad (2015) examined the comparative advantage of Bangladesh in Clothing sector with Balassa index

which has positively impact. Manoj (2014) analyzed the export performance of India in cotton and textile industry

in both pre and post period of MFA phase out from the period of 1992-2012 whereas Nordas (2004) showed that

India and China have significantly impact of MFA phase-out with lower labor cost. Similarily, Mohan Kathuria

(2013) analyzed the dynamic Revealed Comparative Advantage and spearman rank correlation to determine India

and Bangladesh’s clothes export competitiveness in the world trade. Kannan (2018); Dhiman & Sharma (2017)

and Hashim (2005) examined RCA and export competitiveness in cotton and textile industry of India, concluded

MFA phase out has positively influence on Indian export on the global textile and cotton market. Similarly,

Ahmad et al. (2013) analyzed the regional developing economies of China, India, Pakistan and Bangladesh

competitiveness of pre and post trade liberalization from the period of 1980-1994 and 2005-2011 and also

examined the post- quota abolition (2005-2011). Nabi & Kaur (2019) have calculated RCA of India with Nigeria

and have found, India is having Comparative Advantage by exporting four commodities viz; Machinery,

Pharmaceutical Products (30), Nuclear Reactors, Mechanical Appliances, Boilers; parts thereof (84). Dhami J. &

Kaur G.(2014) has studied Indian exports with Thailand and have concluded that RCA and RSCA help to evaluate

and underline the importance of trade rules or management and specialization of countries that have comparative

advantage in several goods subject to foreign trade exchanges. Kaur N. and Sarin V. (2017) measured the Indian

export competitiveness vis-a-vis ASEAN countries in agriculture products. The data shows a little change in the

comparative advantage and competitiveness. Further, it shows the lack of diversification and quality improvement




in the agriculture export of India towards ASEAN countries. Mainly the present study focuses on the level of

trade competitiveness and comparative advantage of Textile and Cotton industry of India and Bangladesh in the

global market. Thus, the study identifies the trade competitiveness of India’s Textile and cotton based on RCA

and RSCA indices.

Research Methodology

The study is empirical in nature and is based on Secondary data. The proposed study is based on Balassa’s

Revealed and Symmetric Comparative Approach to examine the comparative advantage and competitiveness

respectively for 50-63 main products of textile and clothing industry of India and Bangladesh. The study has been

used 2 –digit classification of harmonized system data of 14 main products from 2005-2019. For the analyzes

purpose data has been collected from WTO and UN comtrade.

According to Balassa, 1965, “Revealed Comparative Approach defined as ratio among the certain export

products of a country’s overall export to the world and a country’s total export to total world exports”. RCA can

be calculated as

RCAik= (Xik/Xi)/ (Xkw/Xw)

Where Xik signifies as India’s export to Bangladesh of specific commodity, Xi denotes as India’s export to

world of specific commodity, Xiw represents as world’s export to Bangladesh of specific commodity, Xw for

world’s total export to rest of the world of specific commodity, I, k, w represent for India, Bangladesh and

World.

The magnitude range of RCA index lies from 0 to ∞ (0≤ RCAik≤∞). RCAik greater than 1 means than RCA in

product k in the country i and if value is less than 1 indicated that country i has comparative disadvantage in k.

As follows RCA turns out to produce an output product which cannot compared the both side of the 1 whereas

RSCA measures the value from range of -1 to 1(Dalum et al.1998; Widodo,2009). RSCA can be formulated as:

RSCAik= [RCAik-1/RCAik+1]

Data Classification

The data for this study were obtained from the World Bank, UN Comtrade and UNCTAD. The study covers time

period from 2005 - 2018, due to phase out of export quota system in 2005.Textile and Clothing trade are used in

the study which is based on 2 digits Harmonized identification codes 50 to 63 which is mentioned under the

section-6 of the textile article. The commodities are further divided into categories, 50 to 59 HS codes related to

fiber and fabrics and 60 to 63 codes described clothing and linen products which constitute to the final products.

The Table1.describes the description of 2-digit HS codes from 50-63 as follow:

Table1. Category of textile and cotton products based on 2-digit HS codes

Sr. No. Description of the product with HS Code

1. Silk (50)

2. Wool, coarse animal hair; horse yarn and woven fabric (51)




3. Cotton (52)

4. Other vegetable textile fibers; paper yarn and woven fabric of paper yarn (53)

5. Manmade filaments (54)

6. Man-made staple fiber (55)

7. Wadding; special yarn; twine; ropes; cordage; felt; nonwovens and cables (56)

8. Carpets and textile floor coverings (57)

9. Special woven fabrics; tufted textile fabric; lace; tapestries; trimmings and

embroidery (58)

10. Impregnated coated, laminated textiles fabrics and textile articles of a kind suitable

for industrial use. (59)

11. Knitted and crocheted fabrics (60)

12. Apparel and accessories, Knitted and crocheted fabrics (61)

13. Apparel and accessories, not knitted and crocheted fabrics (62)

14. Other made –up textiles articles; sets; worn clothing and worn textile articles; rags

(63)

Analysis and Interpretation

Table 1 (see Appendix) shows RCA India trade with Bangladesh from 2005-2018 which has shown the export

competitiveness of export of textile and Cotton Commodities. Export of HS code 51(Wool , coarse animal hair;

horse yarn and woven fabric),52, (Cotton), 54(Manmade filaments), 55( Man Made Staple fibers),

59(Impregnated coated, laminated textiles fabrics and textile articles of a kind suitable for industrial use),

60(Knitted and crocheted fabrics), 61(Apparel and accessories, knitted and crocheted fabrics), 62(Apparel and

accessories , not knitted and crocheted fabrics) and 63 (Other made –up textiles articles; sets; worn clothing and

worn textile articles; rags) which indicating that India’s and Knitted crocheted fabrics had a relative advantage in

the Bangladesh market. HS code (56) wadding also indicating the relative advantage but it has less comparative

than another HS code. Table 2(see Appendix) shown RSCA India’s trade with Bangladesh from 2005 to 2018 by

using the Balassa Index (1998) comparative advantage index. HS code 51, 52, 54, 55, 59 to 3 has significantly

values which proves that these item codes has relative advantage for India. And rest of HS code 51, 53, 57 and

58 has negative values which has not negative value means that India does not have comparative advantage as

compare to Bangladesh. Most of the value are higher than 0.5 which shows there is bilateral trade of India and

Bangladesh.

Conclusion

Textile and cotton industry have significant role in Indian economy, which not only contribute the exports but

also has significant contribution impact to production, technological level and employment growth. The study

has measured the comparative advantage and competitiveness on the base of RCA and RSCA. The RCA




represents the comparative advantage in Global market for examining the comparative advantage of market. The

result shows that India had comparative advantage in HS code 52, 60, 61 and 63 during the period. Therefore,

India needs to improve the quality and technological development. At the same time India has comparative

advantage in natural, crocheted and cotton fiber. In addition, the development of India’s export is also based on

infrastructure, logistics and on technological up gradation. The present study has a few limitations, so the study

concluded with some limitation and suggestions for future studies. The present study has focused only on 2-digit

HS products without considering the 4-digit HS products. Even the availability of recent data for RCA and RSCA

index of Bangladesh was not available beyond the year 2015. Further, many limitations of the study can be

pondered upon by future researchers who can calculate TBI along with the above and find the various

determinants that contribute to trade competitiveness through a primary study. The study area is limited to India

and Bangladesh and the findings may not be applicable to other economies. Hence, the findings of the study may

be considered appropriate for the situations similar to study area and a precaution should be taken while

generalizing the results to other countries.

8. Originality Value

The study addresses only 2- digit HS products of textile and cotton industry between India and Bangladesh. Also,

the paper represents the individual country’s competition at commodity level which may be helpful for the policy

makers of both countries.

References

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and Textile Industries: What Is New and What Is Not?" In Locating Global Advantage: Industry Dynamics in the

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Balassa, Bela.(1965).Trade liberalization and “revealed” comparative advantage1. The Manchester

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Dhiman, R., & Sharma, M. (2017). Productivity trends and determinants of Indian textile industry: A

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Hashim, D. A. (2005). Post-MFA: making the textile and garment industry competitive. Economic and political

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Kaur Namita and Sarin Vishal (2017). Comparative advantages and competitiveness of Indian agricultural

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Kumar, R., Agrawal, P.K. & Singh, I. (2018) Fabrication of micro holes in CFRP laminates using EDM. Journal of Manufacturing Processes. 31, 859-866.

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Nordås, H. K. (2004). The global textile and clothing industry post the agreement on textiles and clothing. WTO

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Fragmentation : New Production and Trade Patterns in World Economy . Oxford University Press.

APPENDIX

Commodity wise RCA with India to Bangladesh (Table No. 1)

H

S

co

de

/

Ye

ar

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

50 0.306

698

0.012

289

0.314

533

1.818

177

0.900

75

0.204

257

0.798

022

0.334

587

0.172

197

0.195

208

0.143

328

0.088

012

0.155

937

4.942

033

51 3.807

716

3.624

371

1.094

175

1.463

147

1.144

266

0.743

454

1.927

267

1.032

437

2.759

351

3.295

192

3.577

733

3.803

473

7.046

734

8.848

324

52 3.054

152

2.537

504

2.018

886

3.273

46

2.421

375

2.244

205

1.950

517

2.283

097

1.917

518

2.139

589

2.153

25

2.173

605

2.259

64

2.347

528

53 0.353

607

0.001

484

0.196

194

0.233

222

1.165

796

0.339

487

0.085

794

0.318

144

0.382

372

0.523

31

0.551

319

0.395

435

0.406

282

1.104

475

54 2.993

647

2.117

26

1.779

168

2.924

045

2.686

893

2.785

39

1.391

79

1.451

432

1.728

884

2.149

117

1.992

401

2.342

905

2.312

932

6.051

82

Sharma, M., &Dhiman, R. (2016). Determinants affecting Indian textile exports: a review. Biz Bytes J Manag

Technol, 6, pp: 193-199.

Verma, S. (2002). Export competitiveness of Indian textile and garment industry. Indian Council for Research

on International Economic Relations, Working Paper, (94).




55 2.308

596

2.485

487

1.789

279

1.569

855

1.449

946

1.152

448

1.065

549

2.272

858

2.504

402

3.017

313

2.938

871

2.479

307

2.744

343

3.661

185

56 1.699

606

3.842

187

6.571

51

6.288

502

8.280

926

2.331

025

2.423

831

2.686

41

2.121

633

1.360

882

0.821

622

0.580

88

1.128

806

3.331

672

57 5.644

542

0.259

033

0.019

679

0.103

549

0.572

578

0.209

902

0.031

875

0.620

427

0.024

247

0.016

885

0.055

186

0.021

987

0.206

803

0.099

658

58 0.780

008

0.643

738

0.683

553

0.662

949

0.964

538

0.646

51

0.670

56

0.948

212

0.789

529

0.545

612

0.536

47

0.529

324

0.617

133

1.092

59

59 1.353

613

0.880

385

0.555

831

1.389

523

1.308

918

0.854

706

1.493

397

4.166

414

4.162

01

3.658

081

2.618

233

2.486

784

3.355

424

7.201

376

60 6.783

505

0.844

43

0.587

507

6.126

227

4.013

228

3.230

272

8.688

695

12.09

627

9.496

003

8.825

207

7.255

093

6.148

173

4.923

619

7.392

432

61 7.253

863

5.687

828

1.485

961

6.805

467

4.197

777

1.727

088

2.660

544

1.382

492

0.845

899

1.488

868

1.815

04

3.326

003

1.667

352

6.162

661

62 10.98

612

2.916

233

3.505

857

6.288

017

3.100

705

5.495

855

4.763

079

5.550

102

3.802

377

4.256

829

4.788

313

6.220

046

4.503

323

4.338

429

63 1.474

535

1.356

441

1.179

06

1.987

463

3.849

809

1.429

82

0.695

321

1.731

285

0.638

093

1.025

742

1.006

688

1.696

562

1.765

221

3.007

888

Source: UNCOMTRADES, Calculations by Author RSA

RSCA with India to Bangladesh (Table 2)

HS

code /

Year

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

50 0.53

058

-

0.97

572

-

0.52

145

0.29

0321

-

0.05

222

-

0.66

078

-

0.11

233

-

0.49

859

-

0.70

62

-

0.67

335

-

0.74

928

-

0.83

821

-

0.73

02

0.66

3415

51 0.58

4002

0.56

7509

0.04

497

0.18

803

0.06

728

-

0.14

715

0.31

6769

0.01

596

0.46

7993

0.53

4363

0.56

3103

0.58

3635

0.75

1452

0.79

692

52 0.50

6679

0.43

463

0.33

7504

0.53

1995

0.41

544

0.38

3516

0.32

2153

0.39

0819

0.31

4486

0.36

2974

0.36

5734

0.36

9802

0.38

6435

0.40

2544

53 -

0.47

753

-

0.99

704

-

0.67

197

-

0.62

177

0.07

6552

-

0.49

311

-

0.84

197

-

0.51

729

-

0.44

679

-

0.31

293

-

0.28

923

-

0.43

325

-

0.42

219

0.04

9644

54 0.49

9205

0.35

8411

0.28

036

0.49

0322

0.45

7538

0.47

1653

0.16

3806

0.18

415

0.26

71

0.36

4901

0.33

164

0.40

1718

0.39

6305

0.71

6385




55 0.39

5514

0.42

6192

0.28

2969

0.22

1746

0.18

3656

0.07

0825

0.03

1734

0.38

8913

0.42

9289

0.50

2155

0.49

224

0.42

5173

0.46

5861

0.57

0925

56 0.25

9151

0.58

6963

0.73

5852

0.72

5595

0.78

4504

0.39

9584

0.41

5859

0.45

7467

0.35

931

0.15

2859

-

0.09

792

-

0.26

512

0.06

0506

0.53

8284

57 0.69

9001

-

0.58

852

-

0.96

14

-

0.81

233

-

0.27

18

-

0.65

303

-

0.93

822

-

0.23

424

-

0.95

265

-

0.96

679

-

0.89

54

-

0.95

697

-

0.65

727

-

0.81

875

58 -

0.12

359

-

0.21

674

-

0.18

796

-

0.20

268

-

0.01

805

-

0.21

469

-

0.19

72

-

0.02

658

-

0.11

761

-

0.29

399

-

0.30

168

-

0.30

777

-

0.23

676

0.04

4247

59 0.15

0243

-

0.06

361

-

0.28

549

0.16

3013

0.13

3793

-

0.07

834

0.19

7881

0.61

2884

0.61

2554

0.57

0639

0.44

7244

0.42

6406

0.54

0802

0.75

6138

60 0.74

3046

-

0.08

435

-

0.25

984

0.71

9347

0.60

1055

0.52

7217

0.79

3574

0.84

7285

0.80

9451

0.79

6442

0.75

7725

0.72

0208

0.66

2369

0.76

169

61 0.75

7689

0.70

0949

0.19

5482

0.74

3769

0.61

522

0.26

6617

0.45

3633

0.16

0543

-

0.08

348

0.19

6422

0.28

953

0.53

7679

0.25

0193

0.72

0774

62 0.83

314

0.48

9305

0.55

6133

0.72

5577

0.51

2279

0.69

2111

0.65

2963

0.69

4661

0.58

354

0.61

9542

0.65

4476

0.72

2993

0.63

6583

0.62

5358

63 0.19

1767

0.15

1263

0.08

2173

0.33

0536

0.58

7613

0.17

6894

-

0.17

972

0.26

7744

-

0.22

093

0.01

2708

0.00

3333

0.25

8315

0.27

673

0.50

0984

Source: UNCOMTRADES, Calculations by Author


textile and clothing exports from india and …ijrar.org/papers/ijrar1bjp102.pdfproductivity trends...

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