While the political crisis in Bangladesh might not significantly impact overall India-Bangladesh trade, it poses a serious threat to India’s cotton sector. India exports $2.4 billion worth of cotton annually to Bangladesh, making it a crucial market for Indian cotton producers.
As per data from the Ministry of Commerce, Bangladesh’s share in India’s total cotton exports has grown from 16.8 per cent in FY13 to 34.9 per cent in FY24. Raw cotton alone accounted for a quarter of India’s total exports to Bangladesh in FY24.
India’s textile industry is beginning to feel the strain as the decline in orders from Bangladesh disrupts the supply chain. While India has started receiving fresh inquiries for garment production, exports of Indian cotton to Bangladesh are on the decline, according to industry executives. This trend is particularly concerning given Bangladesh’s vital role as a global textile hub.
Earlier this month, Chandrima Chatterjee, Secretary General, Confederation of Indian Textile Industry (CITI), noted, although western companies are considering India as an alternative sourcing destination, the Indian textile industry faces challenges in meeting both the qualitative and quantitative demands that Bangladesh previously fulfilled.
However, India’s Production Linked Incentive (PLI) scheme and the PM Mitra scheme are positive steps toward expanding the domestic capacity, she pointed out. Growing concerns in western markets about human rights issues in Bangladesh also make India a more appealing alternative, she added.
Employing over four million workers, Bangladesh’s $45 billion clothing industry was already under strain before the recent political turmoil. According to S&P Global, the industry has been struggling with a weakened electricity generation infrastructure, rising input costs due to the Russia-Ukraine war, and adverse weather events. The situation in Bangladesh remains a significant international concern, as evidenced by discussions between Indian Prime Minister Narendra Modi and U.S. President Joe Biden on the matter.
India’s Finance Minister Nirmala Sitharaman also acknowledged the impact of the situation, noting, the Indian garment and knitted fabric sector is experiencing "a bit of uncertainty" due to the developments in Bangladesh.
