The political upheaval could not have come at a worse time for Bangladesh’s showpiece ready-made garments (RMG) industry. The South Asian country, which is the world’s second largest supplier of apparel products, was to grapple with loss of tariff-free access to Europe’s fashion industry in 2025, and the resultant possible shift in manufacturing base to India and Vietnam, among other countries.
India’s garment industry, which has underperformed in the last decade, may gain incrementally in export markets in the short term. But it may face tough competition from Vietnam and China and other countries, if prolonged problems in Bangladesh result in a major rejig of the RMG supply chains over the long term. For the upstream spinning sector of the India’s textile and clothing industry, the crisis in Bangladesh could mean loss of orders.
In the immediate future, Indian investors in Bangladesh’s RMG industry, which include a clutch of leading textile companies, like Shahi Exports, Pearl Fashions and Gokaldas, are likely to face challenges in maintaining their production flows. Roughly a fifth of RMG investments in the neighbouring country is of Indian origin.
Market perceptions of the situation has, however, been positive for Indian textile companies. The stocks of Arvind, KPR, Gokaldas, Vardhman, Welspun and SP Apparels jumped in the range of 5-19% on Tuesday.
“Trade is the life line of Bangladesh with garment exports accounting for 85% of its goods exports. Bangladesh garment export at over $50 billion (see chart) is more than 3 times India’s exports at $15 billion at present,” think tank GTRI said in a note.
Mithileshwar Thakur, Secretary General, Apparel Export Promotion Council (AEPC) described the current situation in Bangladesh as a “matter of great concern.” “India has no intention or inclination to exploit this unfortunate situation in a friendly neighbouring country. However, the garment industry is making serious efforts to grow RMG exports on its own, based on its merit.”
He said that in in short-term, some garment orders may shift to India and the Indian industry may be asked to fill the gap caused by the disruption. “We, however, have long-term goal ahead of us… we are focussed on enhancing quality and ensuring compliance to attract the best of the global (garment) brands. We are adhering to best ethical practices and following environmental and social norms as per the global standards” Thakur added.
According to Prabhu Dhamodharan, convenor at Coimbatore-based Indian Texpreneurs Federation, “For the short term there may be a shift to other destinations including India and China but once Bangladesh bounce backs, then competitiveness matters.” He added that iIn the short term India might get some volumes. “We are at currently at $1.3-1.5 billion monthly export run rate. We have the capacity to handle an additional $300 to $400 million in monthly volumes.”
The Confederation of Indian Textile Industry, which largely represents the capital-0intensive spinning industry, believes that the situation could have an immediate impact on the supply chain, potentially affecting production schedules and delivery timelines of Indian firms.
“Amid the uncertainties in Bangladesh, there is already a noticeable shift towards alternative manufacturing hubs … as a strategic move by companies to diversify their production bases and reduce dependency on a single market,” CITI was quoted by PTI as saying. “(CITI) observed that Indian textile hub Tirupur, known for its robust textile and apparel manufacturing capabilities, may emerge as a key beneficiary of this shift.”
However, Dhamodharan noted that Bangladesh apparel sector is crucial for Indian spinning and (largely MSME-based) fabric sectors. “Due to their lack of capacity in spinning and fabrics, their dependency on India is high. If Bangladesh bounces back soon, India’s yarn and fabric exports will also do well in the upcoming cycle.” Structurally, India has a natural advantage as a more stable sourcing destination with timely delivery In the long term, the China-plus-one strategy will also drive buyers to India as a de-risking measure, he noted.
Kumar Duraiswamy, Joint Secretary, Tiruppur Exporters’ Association said some of the biggest global retailers have been diversifying their production bases (away from Bangladesh) over the past six months to India and elsewhere. The current crisis would only strengthen this trend. Currently, with its LDC status, Bangladesh has duty-free access to European markets. Once this privilege goes by 2025, Bangladesh apparel exports, especially knitwear shipments, would be at par with India in terms of pricing. “The chances are very bright for India.. current developments might expedite the buyers’ decision to diversify,” Duraiswamy noted.
DK Nair, a former textile industry executive, however pointed out, the gains for India in the global textiles and clothing market could depend on structural changes in the Indian industry. “Despite the technology upgradation scheme that ran for several years, which made debt for capital equipment less costlier, about 90% of India’s fabric production is still in the decentrsalised powerloom sector,” he noted. Nair added that Integrated Textile Park scheme also failed to improve efficiency of the manufacturing chain because these were not planned in consonance with the traditional production ecosystem located in specific pockets of the country.
Ripple Patel, Managing Director, Fiotex Cotspin said: “As per our internal information, banks and trade have been halted for one week in Bangladesh. The main issue is uncertainty around the existing orders and container cargo that is on the way to Bangladesh. If the situation is not resolved soon the Indian spinning industry will face heat.”
According to Atul Ganatra, President Cotton Association of India, raw cotton exports are unlikely to be impacted much because the season has come to an end. However, Ganatra also said yarn exports may face some headwinds. “But this development can prove to be a big positive for the Indian garment manufacturing as the international brands will turn towards India to meet their immediate demand. Furthermore, a halt in the dumping of cheaper clothes from Bangladesh will also positively impact the domestic industry.”
Manish Patel from Ahmedabad-based Avani Apparels, said: “If stability returns soon enough in Bangladesh, then we may see the reversal and backward movement to Bangladesh as they have cheaper labour and power.” Vijay Purohit, President Gujarat Garments Manufacturers Association also feels that long-term benefit for India would be limited because the preference of Bangladesh over India is primarily due to cost benefits, which may still stay to a large extent. “Cheap labour, power and favourable government policies make Bangladesh more favourable. So if this situation stabilises within a few months, any incremental Indian business may go back to Bangladesh,” he said.
“Several major global brands that rely on Bangladesh for their sourcing needs will also be affected by these disruptions. Brands with significant portions of their supply chain rooted in Bangladesh may experience delays and a decrease in the availability of their products. This, in turn, could lead to a ripple effect across the global retail market, affecting inventory levels and sales,” CITI said.