Indian textile stocks surged in Tuesday's trade, even as the main indices struggled to recover from a significant drop in the previous session. The rally in textile stocks was driven by investor optimism that the ongoing crisis in Bangladesh may prompt international buyers to shift their focus to alternative markets like India, which has a significant presence in the textile and apparel space.
Bangladesh has increased its market share in the apparel industry by leveraging the China-plus-one strategy. However, with political unrest escalating in Bangladesh, reports suggest that international buyers may adopt a Bangladesh-plus-one strategy, potentially benefiting India from this trend.
Against this backdrop, shares of Gokaldas Exports surged by 19% in intraday trading today, reaching ₹1,095 each and breaking a five-day streak of declines. Other textile stocks, including KPR Mills, Vardhman Textiles, Welspun Living, S.P. Apparels, Nitin Spinners, Arvind, and Himatsingka Seide, also experienced rally ranging from 5% to 17%.
In recent years, apparel buyers have increasingly diversified their procurement sources, favoring India. This trend is supported by Government of India's (GoI) initiatives aimed at enhancing bilateral trade through agreements and treaties. Additionally, apparel buyers are consolidating their vendor lists, which benefits larger apparel manufacturers in India.
Despite these favorable conditions, Bangladesh has been outperforming India in apparel exports. The country has gained a larger share of global exports by leveraging the China-plus-one strategy and geopolitical tensions between the United States and China.
In 2019, Bangladesh's share of apparel exports to the USA was 7%, while China's was 30%. By 2023, China's share had dropped to 22%, and Bangladesh's share had risen to 09%. Meanwhile, India has also benefited slightly, increasing its share from 5% in 2018 to 6% in 2023. Similarly, Bangladesh's share of apparel imports into the EU rose to 21% in 2023, while India’s share remained at 5%.
Indian players face lower market penetration in the UK due to tariff disadvantages compared to Pakistan, Turkey, and Bangladesh. However, a Free Trade Agreement (FTA) with the UK could enhance India’s competitiveness by allowing duty-free exports.
Bangladesh’s significant boost in apparel exports has contributed to a record high of $55.56 billion in total exports for the country in 2022–23. Apparel exports alone surged to nearly $47 billion, exceeding the previous record set in 2022 by approximately 10.27%, according to the Export Promotion Bureau (EPB).
The textile industry has become a major sector of Bangladesh’s economy, representing 80% of its exports and 15% of its GDP. The primary markets for Bangladeshi textiles are the European Union, United States, Canada, Australia, and Japan.
However, the current curfew and internet blackout in Bangladesh were severely affecting the manufacturing industry, especially the ready-made garments (RMG) sector. Industry insiders project a 15–20% decline in RMG exports for the next summer season (January–March 2025) due to recent disruptions and factory shutdowns.
Recent media reports showed that the European Union has postponed a new partnership agreement with Bangladesh due to the current unrest in the country.
As the global apparel market evolves over the coming decade, China is losing its dominance due to rising labor costs, geopolitical tensions, and ongoing trade issues with the US. This shift is prompting buyers to seek alternative production bases, creating opportunities for major Asian suppliers like India. However, Bangladesh faces challenges from a foreign exchange crisis, and Vietnam is hindered by high production costs.
India is well-positioned to capitalise on these changes, supported by a stable policy regime with the RoSCTL scheme extended until March 2026, government incentives for low-cost manufacturing locations, and the PLI scheme boosting investments in the MMF and technical textile sectors. Additionally, FTAs with the UK and EU hold significant potential for increasing textile trade.
Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
