How Bangladesh Stole India’s Textile Industry: A Detailed Breakdown

The textile industry, once the pride of India, has seen significant shifts in global competition over the last few decades. Bangladesh, a country that gained independence from Pakistan in 1971, has emerged as one of the world’s top textile and garment producers, overtaking India in various segments. The rise of Bangladesh’s textile sector is a fascinating story of competitive advantages, policy shifts, and economic strategy. This blog explores how Bangladesh managed to “steal” India’s textile industry, dissecting the factors behind its meteoric rise and what this means for the future of global textiles.

The Historical Context of India’s Textile Dominance

India’s textile industry has been one of the oldest in the world, dating back to ancient times when Indian cotton and silk were traded globally. By the time of the British Raj, India had already developed a robust textile ecosystem. Post-independence, the country continued to expand its capabilities, becoming a global leader in cotton and garment production. Major cities like Mumbai, Tiruppur, and Surat emerged as textile hubs, producing fabrics for both domestic and international markets.

However, the tides started to turn in the late 20th century when Bangladesh, formerly East Pakistan, began focusing heavily on its own textile sector. Today, Bangladesh ranks as the world’s second-largest garment exporter, while India lags behind, particularly in the ready-made garments sector.

Factors Behind Bangladesh’s Textile Boom

1. Labor Cost Advantage

One of the most significant reasons for Bangladesh’s rise in the textile industry is its low labor costs. The minimum wage for garment workers in Bangladesh is among the lowest globally. As of 2023, the minimum wage for a garment worker in Bangladesh is about $95 per month, while in India, it is significantly higher, ranging from $145 to $200, depending on the region.

This cost advantage allows Bangladesh to offer much lower production costs to global buyers, especially from the United States and European Union. As multinational companies like H&M, Zara, and Primark increasingly look to cut costs, Bangladesh became the go-to hub for low-cost garment production.

2. Export-Driven Policies and Trade Agreements

Bangladesh has enjoyed a series of favorable trade agreements that have bolstered its textile exports. Most notably:

• Duty-Free Access: Bangladesh, as a Least Developed Country (LDC), has access to the European Union’s Generalised System of Preferences (GSP), which allows duty-free entry of Bangladeshi garments into European markets. This gives Bangladesh a significant price advantage over India, where tariffs often apply.

• Bangladesh’s Export Processing Zones (EPZs): The government of Bangladesh has set up several EPZs that offer tax breaks and minimal regulations for export-oriented industries. These zones have attracted a steady stream of foreign investment, particularly from countries like China and South Korea, further boosting its garment sector.

• US-Bangladesh Trade Relations: Although Bangladesh does not enjoy the same level of preferential access to the US market as it does with Europe, its low production costs still make it a competitive supplier to American retailers.

In contrast, India’s fragmented labor laws and less favorable trade agreements make it harder for Indian textile firms to compete on price.

3. Specialization in Ready-Made Garments (RMG)

While India has a broad textile base—spanning from cotton cultivation to fabric production and high-end fashion—Bangladesh focused almost exclusively on ready-made garments (RMG). This specialization allowed Bangladesh to become the global leader in low-cost, mass-produced clothing.

Bangladesh’s RMG exports hit $46 billion in 2022, with 85% of its total exports coming from textiles. India, in comparison, has a more diversified export portfolio, but its textile exports lag at around $36 billion, with only a portion coming from ready-made garments. The focus on RMG gave Bangladesh an edge as global fashion retailers increasingly demanded fast, affordable clothing.

Bangladesh’s Key Players in the Textile Industry

1. Beximco: One of Bangladesh’s largest conglomerates, Beximco has played a pivotal role in expanding the country’s textile sector. It supplies garments to international brands like Calvin Klein, Tommy Hilfiger, and Zara. The company has been a major driver of both employment and export growth.

2. Ha-Meem Group: Another powerhouse in the Bangladeshi textile industry, Ha-Meem Group employs over 50,000 workers and produces textiles for major retailers like H&M, Gap, and Walmart. Its large-scale operations and focus on sustainable production have further boosted Bangladesh’s reputation as a global textile hub.

India’s Decline in Textile Competitiveness

While Bangladesh soared, India’s textile industry has struggled with several key challenges that hinder its ability to compete effectively.

1. Fragmented Supply Chain

India’s textile industry is decentralized, with different stages of production—spinning, weaving, dyeing, and finishing—happening across different regions. While this setup offers some flexibility, it also creates inefficiencies. Bangladesh, in contrast, developed an integrated supply chain where most of these processes occur in concentrated areas, speeding up production times and reducing costs.

2. Labor Laws and Unionization

India’s labor laws are more stringent than those in Bangladesh, and strong labor unions often demand higher wages and better working conditions, driving up the cost of production. While this is crucial for protecting workers, it makes Indian textile firms less competitive in global markets, where price is often the deciding factor.

3. Environmental and Compliance Costs

Both India and Bangladesh have faced international scrutiny over working conditions and environmental regulations. However, India has seen higher compliance costs due to stricter regulations on pollution and labor conditions. The Indian government has increased efforts to improve working conditions and reduce pollution in textile hubs like Tiruppur, which has driven up the cost of operations.

Bangladesh, while also facing criticism for factory conditions (most notably after the Rana Plaza disaster in 2013), has capitalized on a more lenient regulatory environment, allowing it to keep costs lower.

The Role of China in Shaping Bangladesh’s Success

China has played a significant role in the rise of Bangladesh’s textile industry, both directly and indirectly:

1. Outsourcing from China: As China’s labor costs rose in the early 2000s, many global brands began shifting their production to cheaper locations like Bangladesh. Chinese textile firms also outsourced lower-end garment production to Bangladesh, helping it become a key player in global supply chains.

2. Investment in Infrastructure: Chinese companies and the government have heavily invested in Bangladesh’s infrastructure, from textile factories to shipping ports, ensuring efficient transportation of goods. This investment has further strengthened Bangladesh’s position as a global textile exporter.

The Future: Can India Reclaim its Textile Dominance?

India’s government has recognized the need to revamp its textile industry to compete with Bangladesh. Initiatives like the Production Linked Incentive (PLI) Scheme aim to boost domestic manufacturing and attract foreign investment. India is also looking to modernize its textile hubs and invest in sustainable technologies to meet global environmental standards.

However, it remains to be seen whether these efforts will be enough to close the gap with Bangladesh, which continues to thrive due to its low labor costs, efficient supply chain, and favorable trade agreements.

Conclusion

Bangladesh’s rise as a textile superpower was no accident. A combination of low labor costs, government support, and a focus on ready-made garments allowed the country to surpass India in key areas of the textile market. While India remains a major player, particularly in fabric production, its inability to compete with Bangladesh on price and efficiency has significantly impacted its share of the global market.

India now faces the challenge of modernizing its industry, improving labor conditions, and adopting sustainable practices if it wants to regain its competitive edge. Bangladesh, on the other hand, is likely to continue its dominance, leveraging its existing strengths and expanding its presence in global supply chains.