MUMBAI, 6 Aug (Commoditiescontrol): India’s cotton yarn exporters are facing a looming crisis as political instability in Bangladesh threatens to disrupt one of their most critical markets. Bangladesh, a global garment export powerhouse, accounts for 50% of India’s cotton yarn exports. As the situation in Dhaka deteriorates, industry experts are sounding the alarm, warning that if Bangladesh fails to stabilize soon, the impact on India’s cotton yarn sector could be severe.
Rakesh Rathi, an industry expert and former director of the Indian Cotton Association Ltd, emphasized the urgency of the situation. "Garment manufacturing is a crucial part of Bangladesh's economy. Not just Bangladesh, but for India as well, it is essential that then normalcy should return. Bangladesh imports cotton, cotton yarn and fabric as well from India. If the situation worsens, it will undoubtedly affect India’s trade, particularly cotton yarn exports," Rathi said.
Further, some of the well know brands outsource their textile manufacturing activities to Bangladesh. Hence, India's textile industry is hugely worried about the situation in that country.
Echoing these concerns, Ramanuj Das Boob from the All India Cotton Brokers Association highlighted the practical challenges already facing exporters. “India's cotton and yarn exports have been stuck for the last couple of months. Exporters are unable to ship cotton and cotton yarn because importing parties in Bangladesh have delayed opening Letters of Credit, which are essential for these transactions. Export containers are reportedly stuck at multiple ports,” Boob explained.
The potential for a shift in global textile demand away from Bangladesh presents another challenge for India. Rathi noted that countries like Vietnam and Cambodia, which benefit from their status as Least Developed Countries (LDCs), could gain from this shift. “India is less likely to benefit from any potential redirection of textile orders. Vietnam and Cambodia enjoy lower export duties—about 7-8% less—due to their LDC status, making them more attractive alternatives for global buyers,” he said.
This political crisis in Bangladesh, while potentially having limited impact on India's broader trade, could weigh heavily on India's cotton sector. Bangladesh has emerged as a key market for Indian cotton, with exports valued at $2.4 billion annually. According to data from India’s Ministry of Commerce, Bangladesh’s share in India’s overall cotton exports has grown significantly, doubling from 16.8% in FY13 to 34.9% in FY24. Raw cotton exports accounted for a quarter of India’s total exports to Bangladesh in FY24, making the country the top destination for Indian cotton, far surpassing China, the second-largest importer.
The political turmoil in Bangladesh escalated on August 5, when Prime Minister Sheikh Hasina resigned and fled the country, with the Army chief subsequently announcing the formation of an interim government. This development has added to the uncertainty in the region and further complicated the outlook for Indian exporters.
While Bangladesh accounts for a relatively small proportion of India’s total exports, its significance has been growing, with exports to the country nearly doubling over the past decade. In FY24, India exported $11 billion worth of goods to Bangladesh, representing 2.5% of its total exports—up from 1.7% in FY13. Cotton and fuel are the two major commodities driving this trade, each accounting for a fifth of India’s total exports to Bangladesh.
As the crisis in Bangladesh unfolds, the stakes are high for India’s cotton sector, which could face significant challenges if stability is not quickly restored. Although, certain players are considering the current situation as advantage India, but there are lot of confusion in that regards. Cotton, cotton yarn and cloth exports remaining affected and as LDC having upper hand as far as shifting of garment export activity is concerned, overall the scenario, according to some experts, remains negative for India.
(By Commoditiescontrol Bureau; +91 98201 30172)
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