In recent years, countries like Bangladesh and Vietnam have successfully captured significant portions of China’s declining share in global ready-made garment exports. However, India has struggled to fully capitalise on this opportunity.
Now, the ongoing political upheaval and social unrest in Bangladesh—the world’s second-largest RMG exporter after China—may present a significant opportunity for the Indian sector.
Shifting Export Orders And Economic Opportunities
Should the unrest persist, it is estimated that around 10% of ready-made garment export orders could shift to other countries.
This could result in monthly export opportunities worth $200–250 million in the near term and $300–350 million in the medium term for India, according to CareEdge Ratings.
The global ready-made garments trade was valued at approximately $550 billion in 2023, with China maintaining over 30% of the market share despite a decline.
Bangladesh held an 8.5% market share, significantly up from previous years, largely due to China's shrinking role. India, however, ranked a distant seventh with a 3–4% market share.
India's Ready-Made Garments Export Performance
Following the Covid-19 pandemic, India saw growth in ready-made garment exports in FY22 and FY23, but a decline in FY24 as global retailers and brands dealt with excess inventory and delayed purchases due to high inflation in Europe and the US, coupled with rising interest rates.
In FY24, Bangladesh's ready-made garment exports were approximately 3.2 times those of India. However, in Q1 FY25, the ratio decreased to about 2.5 times, indicating India’s growing competitiveness.
This competitiveness has been bolstered by various initiatives aimed at enhancing the efficiency and attractiveness of Indian ready-made garment exports.
Prolonged socio-political uncertainties in Bangladesh may prompt global ready-made garment brands and retailers to diversify their sourcing to maintain delivery schedules.
India is expected to gain 6–8% of Bangladesh’s monthly export orders in the near term and about 10% in the medium term, translating into substantial monthly incremental export opportunities.
CareEdge Ratings' Perspective
CareEdge Ratings has noted a 17% year-on-year decline in Bangladesh’s ready-made garment exports in Q1 FY25, while India’s ready-made garment exports grew by 4% during the same period.
The socio-political disturbances and inadequate forex availability in Bangladesh have led to a narrowing of the export ratio between the two countries.
Akshay Morbiya, assistant director at CareEdge Ratings, said that if the socio-political disturbances in Bangladesh continue for more than one or two quarters, India could gain monthly export orders worth $200–250 million in the near-term, with potential medium-term gains of $300–350 million.
India has demonstrated the capability to sustain monthly ready-made garment exports of over $1.5 billion, indicating its capacity to handle an increase in export orders.
However, given that exports of ready-made garments constitute more than 80% of Bangladesh’s total exports, the country is expected to strive for a quick stabilisation of the prevailing situation to avoid a prolonged impact on its garment sector.
The Indian government’s focus on skilling programmes and the upgradation of Industrial Training Institutes, along with the benefits from the production-linked incentive scheme and potential free trade agreements with the UK and EU, are expected to foster the creation of incremental capacities in India, aligning with the burgeoning export opportunities.
As global ready-made garment brands and retailers seek reliable partners amid the 'China+1' sourcing strategy, India, Vietnam and Cambodia emerge as prime alternatives.
India, with its robust textile infrastructure and supportive government policies, is well-positioned to capitalise on this shifting landscape, it said.
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