S&P Global Ratings stated on Tuesday that India's well-diversified export portfolio means a blip in exports to Bangladesh, currently facing its worst political crisis since independence in 1971 with Prime Minister Sheikh Hasina resigning amid massive protests and an interim government taking over, is unlikely to significantly impact India's overall trade position for the year; meanwhile, the political unrest in Bangladesh, a vibrant textile manufacturing hub, is expected to benefit the Tirupur garment sector, as overseas buyers are already scouting for potential manufacturers in Tirupur, although the full impact on the global textile supply chain will become clearer in the coming days.
Andrew Wood, Director of Sovereign and International Public Finance Ratings (Asia-Pacific) at S&P Global Ratings, remarked that S&P anticipates weak domestic demand conditions in Bangladesh during this period, likely resulting in reduced support for exports from other countries, including India, into Bangladesh. Reflecting this trend, India’s exports to Bangladesh declined to USD 11 billion in 2023-24 from USD 12.21 billion in 2022-23, while imports also fell to USD 1.84 billion from USD 2 billion in the previous fiscal year.
The ongoing crisis in Bangladesh poses significant concerns for India’s textile and apparel sector, especially for companies operating in the neighboring country, according to the Confederation of Indian Textile Industry. The domestic textile industry body warns that any supply disruption in Bangladesh will have an immediate impact on the supply chain, affecting the production schedules of Indian firms.
Raja M Shanmugam, managing director of Warsaw International, a leading garment exporter from Tirupur, noted that the Bangladesh crisis will undoubtedly impact the global textile supply chain, potentially benefiting India. Over the years, Bangladesh, the world’s second-largest exporter of textile goods after China, has emerged as a formidable competitor to India’s garment industry. Lower production costs, government incentives, and cheap labor have enabled Bangladesh to secure more orders. Recently, Bangladesh’s garments have been flooding the Indian domestic market, challenging local manufacturers. The current unrest is expected to disrupt Bangladesh's robust garment sector, impacting production and causing global buyers to avoid a country with an uncertain political climate, fearing production line disruptions. This situation could lead to increased orders for Tirupur companies, although new orders may not materialize immediately but could increase from the next season, according to Shanmugam.
K M Subramanian, President of the Tirupur Exporters Association (TEA), stated that they are adopting a wait-and-watch strategy. "When a country is in crisis, we don't want to appear as if we're scouting for business opportunities. We will wait and watch," he said. He also mentioned that textile hubs in other states with low production costs might benefit from the situation.
Conversely, the crisis in Bangladesh is a cause for concern for spinning mills in Tamil Nadu, as some of them supply yarn to garment manufacturers in Bangladesh. If production is hit in the neighboring nation, their sales could suffer a blow, at least temporarily. This complex interplay of regional and global factors underscores the delicate balance in the textile industry and the far-reaching implications of political instability in key manufacturing hubs.