India Vs Bangladesh in textiles: FTAs may double export market share; Gokaldas, Arvind in focus 

According to Motilal Oswal, the reduction in US tariffs to 10% from the sharp 50% for four months has significantly narrowed the tariff gap with competing sourcing destinations such as Bangladesh and Vietnam.

However, the brokerage said competition will remain intense, particularly from Bangladesh, which enjoys a structural cost advantage due to lower labour costs and has built a dominant position in global apparel exports over the years.

US tariff clarity lifts sentiment

Demand in the US apparel market continues to remain strong and is expected to support export orders. “The added clarity on the US tariff framework is a sentimentally positive development for the sector. US apparel retail continues to witness strong momentum, with clothing and accessories store sales rising 0.63% MoM and surging 13.65% YoY in June 26,” Motilal Oswal noted.

Apparel was also among the strongest-performing retail categories, alongside sporting goods and electronics, which together posted 18.53% annual growth.

The resilient consumer demand came despite high US tariffs which had weighed heavily on Indian textile exports earlier this year, prompting global buyers to shift sourcing to Vietnam, Cambodia and Indonesia.

India-UK FTA offers long-term growth opportunity

Another factor that is expected to drive India’s textile sector growth is, the India-UK Free Trade Agreement (FTA), which came into effect on July 15. Motilal Oswal believes this could become a structural growth driver for the textile industry.

“While the near-term impact is expected to be gradual, the agreement provides a meaningful long-term opportunity to increase India’s UK market share from 6% to low double digits over the next few years,” Motilal Oswal noted.

The agreement removes UK import duties of 8-12% on Indian apparel, improving India’s competitiveness against Bangladesh, Vietnam, Pakistan and Turkey.

India-EU FTA could unlock another export market

India-EU Free Trade Agreement is also expected to provide another major growth opportunity once it comes into force in 2027 following ratification.

The agreement will remove the existing 10-12% import duty on Indian textile and apparel exports to Europe, placing India on par with duty-free competitors such as Bangladesh, Vietnam, Pakistan and Turkey.

Motilal Oswal said European brands are increasingly looking to diversify sourcing away from China and Bangladesh, creating fresh opportunities for Indian exporters. 

“The EU currently sources heavily from China and Bangladesh but only marginally from India, reflecting decades of tariff-driven stagnation. The FTA unlocks a meaningful incremental export opportunity as European brands actively look to diversify away from China and Bangladesh, though the ramp-up will likely be gradual given the EU’s fragmented market structure compared to the more homogeneous US market,” Motilal Oswal said.

India gains from integrated supply chain

Motilal Oswal believes India’s biggest strength lies in its integrated textile ecosystem.

India is the world’s second-largest cotton producer and also has the second-largest spinning capacity globally. Unlike Bangladesh, which has limited backward integration, India has an end-to-end supply chain spanning cotton production, spinning, fabric and garment manufacturing.

The report noted that Pakistan and Bangladesh have remained reluctant to invest heavily in backward integration because of the high capital requirement and relatively lower returns.

China, meanwhile, has been reducing its spinning capacity and shifting its focus towards man-made fibres, while Vietnam is increasingly moving towards electronics and services.

This leaves India as the only major sourcing destination that continues to expand spinning capacity while strengthening compliance standards, making it an attractive long-term manufacturing hub for global retailers.

Does Bangladesh have a competitive edge over India?

However, despite the tariff relief, Bangladesh continues to remain structurally more competitive because of its lower manufacturing costs.

According to the report, labour costs in Bangladesh are around 35-40% lower than in India, while labour accounts for nearly 30% of apparel manufacturing costs. This gives Bangladeshi exporters a pricing advantage, especially in knitwear.

The brokerage believes this cost advantage will keep competition intense even as India’s tariff position improves.

How can Indian companies benefit?

The report said global retailers are increasingly reducing the number of suppliers they work with and are placing larger orders with companies that can execute at scale.

Bangladesh currently has a clear advantage on this front. Its top 10 apparel exporters each generate more than $350 million in revenue, and at least 15 companies have revenues exceeding $230 million.

India’s scale remains comparatively smaller, with only five exporters crossing the $350 million revenue mark.

Motilal Oswal said this trend is likely to benefit India’s larger listed exporters such as Gokaldas Exports, Arvind and Pearl Global, as they are better positioned to handle large global orders.

Conclusion

Motilal Oswal expects most of India’s textile exporters to post  revenue growth in mind-teens between FY26 and FY28, supported by the India-UK FTA, improving demand from the US and, over time, the India-EU trade agreement. 

While India’s integrated supply chain, expanding spinning capacity and improving trade access are expected to strengthen its position in the global textile market over the medium to long-term, Bangladesh’s lower manufacturing costs and larger export scale will continue to pose stiff competition.

The brokerage noted that meaningful capacity expansion announcements are yet to materialise, adding that India will require significantly higher investments to narrow the scale gap with Bangladesh.