Global Retailers Shift Focus to India as Bangladesh Faces Political Crisis

The political crisis in Bangladesh is putting a threat in front of Garment Business at the global level. Numerous buying houses in Western countries are now searching for new destinations besides Bangladesh for readymade garments.

They have found India a suitable and reliable country for the apparel business. This shift has opened the floodgate for India’s textile industry, particularly given the upbeat export order situation witnessed in the last few months.

Today, Indian exporters are struggling to meet export orders in the last few months as many American companies are scouting for new suppliers,” said M K Thakur, Secretary General of India Apparel Exports Promotion Council (AEPC).

This trend beams as the silver lining to India’s textile industry which is the second largest employer to the populace with about 45 million employees. While the demand increases, the Indian government is mulling over new policies to bolster the industry’s capability and its standing in the international market.

Bangladesh is the second largest exporter of garment products, next only to China, and is much sought after for supply by international retailers.

However, due to the political instabilities, it has also str lengthened their supply chain and is considered unreliable at present. BTW Jan-Nov, 2024 Bangladesh’s garment exports to the U.S. had declined by 0.46% to 6.7 bn. During the same time export to the U.S raised a little by 4.25% to $4.4 billion, according to the U.S. Office of Textiles and Apparel.

Speaking with us Mona, a Montreal-based distributor of garments from Dhaka-based factories supplying North American and European retailers, said: “Some American buyers have switched their orders from Bangladesh to India and Vietnam because of the existing crisis,” he said.

Readymade garment exports from India have registered a brilliant increase registering more than 11 % y-o-y have crossed nearly $10 billion in the first eight months of the fiscal year to November. This momentum is expected to continue, beginning with export figures over $16bn by March 2025, in Thakur’s belief.

The government of India has observed the increasing demand of its textiles hence part of its strategies to improve the competitiveness of the sector is under consideration. In an interview with a senior government source believes that the budget share for the textile ministry for 2025/26 may rise by 10%-15% up from the actual budget of ₹44.17 billion ($511 million).

In addition, an enhancement in funding is expected for the production-linked incentive (PLI) scheme associated with the textile sector. The scheme that provides tax incentives and other concessions to industries manufacturing locally may get an increase in its allocation to ₹600 million from ₹450 million in the current year.

Also, the government is considering a decrease in tariffs on necessary raw materials including polyester and viscose staple fibers for textile and on textile machinery.

Australian import duties for these materials currently stand at between 11% and 27%, being much lower than the almost negligible tariffs that currently apply to any import at 0.1% for Bangladesh, thereby granting the neighboring country a slightly competitive advantage. If some of these tariffs are reduced, then it might be possible for Indian manufacturers to cut costs on production and in the process export their goods to another part of the globe.

Textile and garment exports of India have compounded at a higher rate than the total merchandise exports again proving the potential of the sector. Textile and garment exports in the first eight months of the current fiscal year increased 7.3 percent year-on-year to over $ 2300 million. Conversely, the total of goods exports increased by only 2% over the same period.

There are various reasons behind this increase in exports such as the global shift in supply chains because of problems faced by Bangladesh, better production capabilities in India, and increased tendency of buyers from different parts of the world for supplier diversification.

Europe is gradually becoming a market for Indian textiles besides the U.S. but buyers are in dire search of reliable suppliers. India has a competent pool of human capital, well-developed infrastructure, and a diverse portfolio of products, making it ready to harness this trend.

However, despite the revealed trend, India’s textile industry is subject to certain threats that may negatively impact business development and, consequently, derail the industry itself.

Current high tariff charges on raw materials reduce competitiveness as they are costlier than garments from other Asian countries such as Bangladesh and Vietnam. These challenges will be crucial for continuing to compete and maintain this sector’s evolvability.

Further, the textile structure in India is quite unorganized, and the industry is inclusive of many SMEs, which may require efforts to be made to achieve ramp-up in production. These barriers are only going to be solved by government intervention in terms of funding, infrastructure, and policy changes.

The crisis in Bangladesh has significance in that it ties into a growing world shift towards seeking to justify risk by diversifying which markets supply what products. However, India having benefited from this change, also competes with other emergent textile players such as Vietnam and Indonesia, Cambodia.

Nevertheless, India enjoys several natural benefits including a large home market, huge production network, and rising concern for environmental compliance.

From creating better quality products to reducing their costs through stringent methods of production, Indian manufacturers can cement their place in world markets through seriousness in innovation, quality control, and environment-friendly productions.

The announcement for future course of action about the textile industry is anticipated for the Indian budget session to be held in the latter half of February this year. While policymakers across the developed and developing world continue to fine-tune policies to attract global retailers, India still stands a good chance of positioning itself as a preferred long-term investment horizon for international retailers.

For now, the political crisis in Bangladesh has given a golden opportunity to the Indian textile industry. The test lies in how this momentum can be sustained and transformed to foster a sustainable, competitive, global textile industry that can sustain itself, beyond the current conditions.