5 min readJun 4, 2025 06:16 PM IST
First published on: Jun 4, 2025 at 06:16 PM IST
Written by Rahul Mazumdar
The recent move by India to restrict garment imports from Bangladesh via land routes may be short-term and may merely provide a temporary boost to India’s textile industry. The fact, however, remains that Bangladesh is facing a threefold challenge, and if India can use this as an opportunity and build upon it suitably, the textile industry in the country could experience long-term growth.
Bangladesh’s post-Hasina political situation has opened a window for Indian textile exports. The spectre of reciprocal tariffs initiated by US President Donald Trump is looming over Bangladesh’s economy. These tariffs are in abeyance until July. The US market accounts for around 14 per cent of Bangladesh’s exports.
It may be noted that Bangladesh’s exports have seen a steady increase, with a compound annual growth rate of 6.5 per cent — from USD 42 billion in 2020 to USD 57.5 billion in 2024. This is largely attributed to its textile industry. In fact, the share of textiles in Bangladesh’s exports has increased from 76 per cent in 2004 to 88 per cent in 2024, as it continued to excel in cut-and-sew models.
However, the major concern for Bangladesh — beyond its political situation and the US tariff risk — is the impending case wherein it may lose the zero-duty preferential trade benefits granted to Least Developed Countries (LDCs) like itself from 2026, when it is expected to graduate from LDC status. Bangladesh has benefited significantly under this mechanism, having expanded its market to developed countries like the 27-nation EU and the US.
Market-wise distribution of textiles and garments exports in 2024 shows that India holds only a slight edge in the US, with exports at USD 8.1 billion compared to Bangladesh’s USD 7.6 billion. However, with respect to the EU and the UK, Bangladesh is far ahead of India. Bangladesh’s exports to these two key markets stood at USD 28.3 billion and USD 4 billion respectively, as compared to India’s exports of USD 5.6 billion and USD 1.7 billion. In Australia too, Bangladesh’s exports are double that of India, at around USD 1 billion.
It, therefore, becomes important for India to negotiate well in the FTAs, especially with the EU, which could enhance India’s competitiveness in the global apparel market. At the same time, non-tariff barriers (NTBs) in the EU for Indian textiles should also be a significant part of these discussions.
According to the recently concluded India-UK FTA, garments exported from India will be tariff-free — previously they were subject to 8 to 12 per cent import duties in the UK. If a similar FTA is signed with the EU nations, Indian garment exports could increase many times over.
Secondly, beyond FTA negotiations, the most important aspect is creating mass production capabilities in Indian textiles, akin to its competitors. Bangladesh’s comparative advantage lies in its ability to provide manpower at lower cost. While India can continue to manage its workforce costs, the government must constructively plan to enable large-scale textile production to compete with Bangladesh. The PM MITRA Parks (Pradhan Mantri Mega Integrated Textile Region and Apparel) should help develop large-scale, modern industrial infrastructure that supports an ecosystem attractive to investors.
Thirdly, India needs new textile machinery, including those that incorporate advanced technologies. Textile mills are often reluctant to upgrade to modern machinery due to high initial costs, resulting in inefficiencies and reduced productivity. The government may consider incentivising companies through a scheme that facilitates the replacement of machinery that is at least 15–20 years old. This would also boost production through automation.
Finally, product diversification in the textile industry is crucial. While India continues to produce readymade garments, it could also explore higher-value products by focusing on man-made fibres, which account for a larger share of global textile consumption than natural fibres. Embracing innovations such as 3D printing would also offer flexibility in yarn processing and textile design, as well as support digital printing.
The EU is becoming increasingly strict about environmental regulations. In this scenario, a focus on sustainable products — such as biodegradable textiles and eco-friendly dyes — is essential for the Indian textile and garment sector. The government should support the adoption of such technologies under the Amended Technology Upgradation Fund Scheme (ATUFS).
A comprehensive FTA with the UK, EU, and the US can propel the textile industry onto a new trajectory, fostering an ecosystem of mass production and sustainable infrastructure aligned with global demand. If the right efforts are made, India could reap significant dividends.
The writer is an Economist with Exim Bank. Views expressed are personal
According to the recently concluded India-UK FTA, garments exported from India will be tariff-free — previously they were subject to 8 to 12 per cent import duties in the UK. If a similar FTA is signed with the EU nations, Indian garment exports could increase many times over. 
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