How the Indian Textile Industry Got a Slight Relief from the Bangladesh Crisis of 2024: An Analysis

n 2024, India’s textile industry received an unexpected boost, as Bangladesh—the world’s second-largest garment exporter—faced a significant crisis that disrupted its textile production. The turmoil in Bangladesh created ripple effects in the global garment supply chain, forcing international brands to look elsewhere, and India, as a neighboring textile powerhouse, benefited from the situation. However, the situation highlights the importance of political stability and long-term reforms for sustaining this relief.

This blog explores the dynamics behind the Bangladesh crisis, how the Indian textile industry benefited, and why political stability is crucial for business.

The Bangladesh Crisis of 2024: What Happened?

In early 2024, Bangladesh experienced a major political and economic crisis that severely disrupted its booming textile sector, which accounts for over 85% of the country’s exports. Key factors behind this crisis included:

1. Political Unrest: Bangladesh’s political landscape became highly unstable after a disputed election in late 2023, leading to mass protests, strikes, and violence. The widespread unrest resulted in factory shutdowns, transportation delays, and significant disruptions in the ready-made garments (RMG) industry. The instability caused production to fall sharply, with some estimates showing a 20% reduction in garment exports during the first quarter of 2024.

2. Energy Shortages: Bangladesh has long struggled with power shortages, but the crisis worsened in 2024, with rolling blackouts affecting textile factories. Many textile mills were unable to operate at full capacity due to inconsistent electricity and rising fuel costs, further hampering their ability to meet international orders.

3. Labor Strikes: Rising inflation and dissatisfaction over wages led to a series of labor strikes across the country’s garment factories. Factory workers, demanding better wages and working conditions, halted production in major manufacturing hubs like Dhaka and Chittagong, putting additional pressure on the already struggling industry.

These factors created a perfect storm, causing major disruptions in global supply chains. As brands like H&M, Zara, and Primark scrambled to meet demand, they began to turn to neighboring India for production.

How India Benefited from the Bangladesh Crisis

1. Increased Export Orders

The crisis in Bangladesh led to a sudden surge in demand for Indian textile manufacturers. India, with its long-established textile base, was able to absorb part of the overflow of orders that were previously allocated to Bangladesh. By mid-2024, Indian garment exports rose by an estimated 8-10%, with sectors like ready-made garments (RMG), fabrics, and cotton seeing a notable increase in demand.

• For example, the Tiruppur garment hub in Tamil Nadu, which specializes in knitwear and garments, reported a 15% increase in export orders in the first half of 2024 alone. Brands looking for quick alternatives shifted their orders to Indian manufacturers, temporarily boosting India’s textile sector.

2. Favorable Government Policies

India’s government seized the opportunity by rolling out supportive policies for the textile industry during the Bangladesh crisis. The Production Linked Incentive (PLI) Scheme, announced in 2021, had already begun to bear fruit by 2024. The scheme offered subsidies to domestic textile companies to ramp up production, which helped Indian companies scale operations quickly in response to new export opportunities.

Moreover, the Indian government reduced certain export duties and streamlined labor laws for export-oriented sectors during the crisis, allowing factories to operate more efficiently and meet rising demand.

3. Diversification of Buyers

For years, Bangladesh had cornered the market in low-cost ready-made garments. However, the political instability in Bangladesh pushed global buyers to diversify their supply chains. Many international companies, wary of further disruptions, began looking for more stable alternatives in the region. India, with its large textile infrastructure, skilled labor, and government support, became an attractive option.

As a result, Indian textile manufacturers forged new relationships with global retailers, ensuring a more sustainable demand even after the crisis subsides. Companies like Aditya Birla Group and Arvind Mills reported a spike in inquiries and contracts from European and North American buyers during the crisis.

Political Stability is Crucial for Business

While the Bangladesh crisis provided a short-term boost to the Indian textile industry, it also underscored a critical truth: political stability is essential for long-term business growth. The events in Bangladesh highlight how political turmoil, even in a highly competitive and well-established sector, can severely disrupt the supply chain and erode a country’s competitive edge.

1. Impact of Political Instability on Businesses

Political instability—characterized by protests, strikes, or sudden policy changes—can have devastating effects on businesses:

• Factory Shutdowns: Prolonged periods of political unrest often lead to labor strikes and blockades, shutting down factories and disrupting production lines.

• Supply Chain Disruptions: Instability affects not just production but also transportation and logistics, leading to delays in delivery, missed deadlines, and penalties from international buyers.

• Loss of Foreign Investment: Political uncertainty discourages foreign direct investment (FDI), as investors seek stable environments to safeguard their capital. In Bangladesh’s case, international buyers and investors began shifting focus to more stable regions like India, fearing that continued instability could affect future production.

2. India’s Need for Stability

While India has benefited from Bangladesh’s challenges, it is not immune to its own political and economic issues. The Indian textile industry, which employs more than 45 million people directly, is highly dependent on both domestic stability and favorable international trade relations. Political issues like regional unrest, bureaucratic hurdles, and inconsistent labor laws can disrupt the industry if not managed carefully.

In fact, India’s textile hubs have seen occasional disruptions due to labor strikes and environmental regulations in places like Tiruppur and Surat. However, the government’s proactive stance, particularly with labor reforms and tax incentives, helped mitigate the impact during the Bangladesh crisis. Maintaining this stability is key to ensuring that India remains a competitive alternative for global buyers.

• In 2024, India’s garment exports reached around $40 billion, up from $36 billion in 2022, largely due to the Bangladesh crisis. However, the long-term sustainability of this growth depends on continuing economic and political stability.

Challenges Ahead for India and Bangladesh

1. The Return of Bangladesh

While Bangladesh faced significant setbacks in 2024, its competitive advantages—particularly in terms of low labor costs—are still formidable. As the political situation stabilizes, Bangladesh is expected to regain much of its market share, especially if the government implements reforms to address labor unrest and energy shortages.

• For India, this means that the current uptick in demand may be temporary unless Indian manufacturers continue to modernize and adopt sustainable practices that make them competitive beyond just cost factors.

2. India’s Long-Term Strategy

For India to capitalize on this momentary relief, it needs to continue with its reform agenda. Investing in automation, sustainability, and skilling the workforce will be essential to remain competitive on the global stage. The Indian textile sector also needs to focus on value addition, such as producing high-end garments and technical textiles, which command higher profit margins and are less vulnerable to cost-based competition.

Conclusion

The Bangladesh crisis of 2024 has given India’s textile industry a short-term boost, but it also highlights the importance of political stability in business. While India benefited from Bangladesh’s unrest, its long-term success will depend on how it navigates its own internal challenges and continues to attract global buyers through innovation, efficiency, and stable governance.