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Textile stocks in India are likely to be in focus on Tuesday, February 10, amid concerns that Bangladesh’s ongoing trade engagement with the United States could alter sourcing incentives in the regional textile supply chain, with potential implications for Indian cotton and yarn exporters.
Bangladesh has secured a limited but significant tariff concession from the US, allowing zero-duty access for certain garments made using US-produced cotton and man-made fibres.
In a post on X, Muhammad Yunus, the chief adviser heading Bangladesh’s interim government, said Washington had “committed to establishing a mechanism for certain textile and apparel goods from Bangladesh using US-produced cotton and man-made fibre to receive zero reciprocal tariff in the US market”.
The trade metrics
The RMG sector accounts for more than 80% of Bangladesh’s export earnings, employs around four million workers—mostly women—and contributes about 10% to GDP. The US is its single largest export market.
India has traditionally been the largest supplier of cotton and yarn to Bangladesh, which relies heavily on imported raw materials for its export-oriented garment industry.
Any sustained shift by Bangladeshi manufacturers towards US-origin fibre to qualify for tariff benefits could, at the margin, affect demand for Indian raw material exports.
Trade data underscores India’s exposure. Bangladesh has been among the top destinations for Indian cotton and yarn, alongside China and Vietnam. By contrast, India’s garment exports compete directly with Bangladesh in the US market, where Bangladesh benefits from lower manufacturing costs and established scale advantages.
Bangladesh’s edge continues
Speaking on CNBC-TV18, Pallab Banerjee, Managing Director and Group President at Pearl Global, said Bangladesh was already structurally more competitive than India due to its integrated ecosystem, lower manufacturing costs and better infrastructure.
“Bangladesh was always more competitive than India. This kind of deal will make it incrementally more competitive, but I don’t see this as a massive change,” Banerjee said. “The advantage of Bangladesh continues.”
He pointed out that Bangladesh’s spinning industry remains uncompetitive, with recent labour unrest underscoring margin stress. As a result, the country continues to depend heavily on imported cotton and yarn—largely from India.
“Most of the cotton and yarn that goes into Bangladesh today is from India,” Banerjee said, adding that the zero-tariff clause had been under discussion since Washington first signalled reciprocal tariffs earlier this year.
Cost trade-offs remain
While US cotton prices are broadly comparable to Indian cotton—and in some cases Indian cotton trades at a premium—the logistics and inventory burden remains a key consideration. Importing US cotton involves longer transit times and higher freight costs, which exporters would have to weigh against the benefit of avoiding a 19% tariff on finished garments.
“The challenge would be transportation,” Banerjee said. “But once mills start holding US cotton inventory in Bangladesh and spinning locally, that problem can be managed. Then the tariff advantage becomes meaningful.”
He added that only specific orders—particularly those where buyers explicitly insist on US-origin inputs—are likely to qualify initially. The high input threshold, estimated at around 70%, is expected to limit near-term uptake.
What it means for India
Market participants expect an initial sentiment-driven reaction in Indian textile stocks rather than a material impact on earnings.
Speaking on CNBC-TV18, Mayuresh Joshi, Director-Research at Marketsmith India, said Bangladesh has historically been more competitive across several textile segments, while India dominates selectively.
“You will see a sentimental profit booking and Bangladesh has always been competitive. If you look at the construct of exports, India dominates in a few areas, while Bangladesh dominates in most areas,” Joshi said, adding that China also retains a strong presence, particularly in home textiles such as bed sheets and bed pillows.
Joshi said integrated Indian textile players—those with presence across the value chain from yarn to fabric—are better positioned to absorb competitive pressures due to stronger cost controls and operating efficiencies.
“Integrated players who have the entire value chain with them might feel the pinch a little less,” he said, citing companies such as KPR Mill and Vardhman Textiles as relatively better placed.
He also flagged Indo Count Industries, noting that while ratings have faced pressure due to tariffs and capacity expansion, its greenfield investments and commencement of pillow manufacturing in the US could help mitigate tariff-related risks over time.
Joshi said earnings are unlikely to take a substantial hit, with companies expected to adapt to competitive pressures. “It might be a sentimental hit at first, but integrated players should be able to manage both cost impact and pricing pressure better than the rest,” he said.
For Indian textile and apparel companies more broadly, the Bangladesh-US arrangement is being viewed as a selective, order-specific risk rather than a structural shift. While some displacement of Indian cotton in US-bound Bangladeshi supply chains is possible, India’s yarn and fabric exports may remain supported by Bangladesh’s higher spinning costs and operational constraints.
India’s textile exports to the US, meanwhile, continue to face standard MFN tariffs, limiting pricing flexibility relative to Bangladeshi suppliers where sourcing rules tilt towards US-origin inputs.
