Indian garment exporters may gain amid Bangladesh crisis

Indian exporters of ready garments may gain amid the social unrest and political instability in Bangladesh, CareEdge said in a recent report.

In the past, Bangladesh and Vietnam had cornered a significant chunk of China’s declining share in global readymade garment exports, while India had failed to adequately capitalize on the trend, the report said.

“If political instability and social unrest prolong in Bangladesh, around 10% of its readymade garment export orders could shift, and this can present monthly export opportunities to the tune of $200-250 million in the near term and $300-350 million in the medium term,” Akshay Morbiya, assistant director at CareEdge Ratings, wrote in the report.

In 2023, the global readymade garment market was valued at $550 billion. China led with over 30% of exports, despite a declining share, followed by Bangladesh at 8.5%, which saw consistent growth from 2015 to 2023, largely at China’s expense.

India ranked seventh, holding a 3-4% market share during the same period.

In FY24, Bangladesh’s exports of readymade garment were about 3.2 times those of India; but this ratio decreased to 2.5 times in the April-to-June quarter of this year, reflecting India’s growing market share.

This shift, supported by socio-political issues in Bangladesh and competitive initiatives in India, might lead global brands to diversify sourcing away from Bangladesh, particularly if instability persists.

India could gain 6-8% of Bangladesh’s monthly orders in the near term and 10% in the medium term, potentially increasing exports by $200-250 million monthly in the near term and $300-350 million in the medium term, the report said.

With capacity to expand RMG exports by 20-25%, and ongoing efforts like the China+1 strategy, India is well-positioned to capitalize on this shift, CareEdge Ratings said in the report, adding that India’s comprehensive textile chain and government initiatives such as PM MITRA parks and FTAs further bolster its competitiveness as a sourcing alternative.

“Readymade garment manufacturing is an asset-light albeit labor-intensive operation. The recent budget announcement on skilling and upgradation of industrial training institutes apart from PLI (production-linked incentive) benefit for the sector and potential free trade deals with UK and EU, will augur well for creation of incremental capacities in India given the export opportunities,” said Krunal Modi, director at CareEdge Ratings.

Shift in India-Bangladesh trade

In recent years, India and Bangladesh have seen shifts in their trade dynamics.

India’s exports to Bangladesh dropped from $16.2 billion in FY22 to $11.1 billion in FY24, a 31.5% decline.

In contrast, India’s imports from Bangladesh were relatively stable, decreasing slightly from $1.9 billion in FY22 to $1.8 billion in FY24, a 5.3% reduction.

Bangladesh’s severe dollar shortage and rising inflation have restricted its import capacity and reduced domestic demand for both local and imported goods, think tank Global Trade Research Initiative
(GTRI) said in a recent report.

The trade imbalance favoring India stems from its diversified exports, including agriculture, textiles, machinery, electronics, auto parts, iron, steel, electricity, and plastics, most of which are fully tariffed outside the South Asian Free Trade Area (SAFTA), the report said.

Conversely, Bangladesh’s exports to India, mainly textiles, garments, and made-ups, constitute 56% of its total exports and enjoy zero tariffs under SAFTA, it added.