Context

The United States and Bangladesh have signed an Agreement on Reciprocal Trade allowing zero reciprocal tariff access for specified volumes of Bangladeshi textile and apparel exports to the U.S., conditional upon the use of U.S.-origin textile inputs such as cotton and man-made fibres (MMF). The agreement has raised strategic concerns for India’s textile and apparel sector.

Why It Matters for India

1. Yarn Export Dependence

• India exported $1.47 billion worth of cotton yarn (570 million kg) to Bangladesh in FY 2024–25.
• Bangladesh is India’s largest yarn export destination.
• Increased sourcing of U.S. cotton by Bangladesh may reduce India’s yarn exports.

2. U.S. Market Exposure

• 20% of Bangladesh’s garment exports go to the U.S.
• 26% of India’s cotton apparel exports are destined for the U.S.
• Preferential access could alter price competitiveness in favour of Bangladesh.

3. Competitiveness Concerns

• Bangladesh dominates cotton-based apparel such as T-shirts and women’s wear.
• Zero tariff access may reduce India’s cost advantage.
• Risk of supply-chain shift toward U.S. cotton inputs.
• Concerns over traceability and potential misuse of origin norms.

Indian Textile & Apparel Sector – Key Facts

• Global Rank: 6th largest exporter.
• Exports: $35.9 billion (FY 2023–24); Apparel accounts for 42%.
• Major Markets: USA (25%), EU, UAE, UK, Germany.
• Employment: 4.5 crore direct, 10 crore indirect (second-largest employer after agriculture).

Structural Challenges in India

• Fragmented MSME-dominated sector; lack of scale.
• Cotton-heavy production, while global demand is shifting to MMF.
• Higher cost of capital (~9%) compared to Vietnam (~4.5%).
• Limited duty-free market access compared to Bangladesh.

Government Initiatives

• PM MITRA Parks – Integrated textile infrastructure.
• Production Linked Incentive (PLI) Scheme (Textiles) – Focus on MMF & technical textiles.
• Apparel Export Promotion Council (AEPC) – Export facilitation.
• Samarth Scheme – Skill development.

Way Forward

• Negotiate reciprocal tariff arrangements with the U.S.
• Diversify toward MMF and value-added garments.
• Strengthen traceability mechanisms.
• Promote branding of Indian cotton.
• Improve cluster integration and scale.
• Reduce cost of capital through policy support.

Conclusion

The U.S.–Bangladesh agreement underscores the vulnerability of India’s textile exports in a tariff-sensitive global environment. While immediate disruptions may be limited, sustained reforms in trade diplomacy, product diversification, and supply-chain efficiency are essential to protect India’s position in global apparel trade.