Even if the primary indices were having difficulty rebounding from a large decline in the previous session, Indian textile stocks saw a sharp increase in trading on Tuesday. Investor confidence that the ongoing crisis in Bangladesh may cause foreign purchasers to refocus their attention on other countries, including India, which has a substantial presence in the textile and apparel space, propelled the increase in textile equities.
Bangladesh has profited from the China-plus-one policy to grow its market share in the clothing sector. But if political turbulence in Bangladesh intensifies, there are suggestions that foreign buyers might choose to pursue a Bangladesh-plus-one approach, which could be advantageous for India.
In light of this, Gokaldas Exports’ shares saw a 19% increase in intraday trade today, hitting ₹1,095 a share, ending a five-day losing skid. Rally percentages ranged from 5% to 17% for other textile stocks, which include KPR Mills, Vardhman Textiles, Welspun Living, S.P. Apparels, Nitin Spinners, Arvind, and Himatsingka Seide.
Turmoil creates opportunity
Buyers of clothes have been diversifying their procurement sources more recently, with a preference for India. The Government of India (GoI) endeavours to increase bilateral commerce through treaties and accords to promote this trend. Larger Indian clothing producers profit from the consolidation of vendor lists by clothes purchasers.
In terms of garment exports, Bangladesh has been outperforming India despite these advantageous circumstances. By taking advantage of the geopolitical tensions between the United States and China and the China-plus-one policy, the nation has increased its share of global exports.
China accounted for 30% of garment exports to the USA in 2019, compared to Bangladesh’s 7% share. China’s share had decreased to 22% by 2023, while Bangladesh’s portion had increased to 9%. India has profited somewhat in the meantime, rising from 5% in 2018 to 6% in 2023. In a similar vein, India’s percentage of garment imports into the EU stayed at 5% in 2023, but Bangladesh’s increased to 21%.
Due to pricing difficulties, Indian players have less market penetration in the UK than those in Bangladesh, Pakistan, or Turkey. On the other hand, duty-free exports under a Free Trade Agreement (FTA) with the UK might increase India’s competitiveness.
Bangladesh’s total exports reached a new high of $55.56 billion in 2022–2023 thanks in large part to a notable increase in clothing exports. The Export Promotion Bureau (EPB) reports that apparel exports alone increased to around $47 billion, surpassing the previous high established in 2022 by about 10.27%.
With the textile industry accounting for 15% of GDP and 80% of exports, Bangladesh’s textile industry has grown to be a significant economic sector. The United States, Canada, Australia, Japan, and the European Union are the main markets for textiles from Bangladesh.
However, Bangladesh’s current curfew and internet outage were negatively impacting the manufacturing sector, particularly the ready-made garment (RMG) business. Due to recent delays and production shutdowns, industry sources predict a 15–20% reduction in RMG shipments for the upcoming summer season (January–March 2025).
According to recent media reports, the ongoing turbulence in Bangladesh has caused the European Union to delay the signing of a new collaboration deal with that country.
China is losing its lead in the global garment industry during the next ten years as a result of growing labour costs, geopolitical unrest, and lingering trade disputes with the US. This change is causing consumers to look for other production sites, which is good news for big Asian suppliers like India. However, Vietnam is hampered by high production costs, and Bangladesh is confronted with difficulties due to a foreign exchange problem.
With a solid regulatory framework that includes government incentives for low-cost manufacturing locations, the RoSCTL plan, which is extended until March 2026, and the PLI scheme, which encourages investment in the MMF and technical textile sectors, India is well-positioned to benefit from these changes. Furthermore, there’s a good chance that free trade agreements with the EU and the UK will boost the textile industry.
