The recently concluded US-Bangladesh trade deal, which includes a clause for zero tariffs on textile exports, is recalibrating competitive equations in the global apparel market, triggering a fresh debate within India’s cotton and textile ecosystem over pricing power, sourcing shifts, and export strategy.
Finalised on February 9, 2026, the pact reduces US tariffs on Bangladeshi goods to 19% and grants zero-duty access to specified volumes of garments made using US-origin cotton and man-made fibres, subject to sourcing conditions.
Just days earlier, the interim India-US bilateral trade framework had reduced US tariffs on Indian goods, including textiles, to 18% from as high as 50%. While India’s baseline tariff is marginally more favourable than Bangladesh’s (19%), a section of industry observers believes that the zero-duty provision, conditional upon the use of US inputs, could provide Dhaka with a more significant advantage in the highly competitive US ready-made garment (RMG) sector.
Bangladesh already dominates US apparel imports in volume terms relative to India. The additional zero-duty window raises concerns about further order diversion. Notably, Indian textile stocks fell by up to 6% soon after the announcement, reflecting investor anxiety over near-term export prospects.
The implications of the US-Bangla trade pact, the domestic textile industry believes, go beyond finished garments and extend into cotton and yarn trade flows. According to the Tiruppur Exporters’ Association (TEA), Bangladesh imports roughly 85 lakh bales of cotton annually to service nearly 500 spinning mills. Its sourcing basket has largely comprised Brazil, India, and African origins, with limited imports from the US in recent years. Despite its significant spinning capacity, Bangladesh’s domestic yarn output remains insufficient for its garment industry, prompting continued imports of yarn and fabrics even as it strengthens its man-made fibre (MMF) base.
As per TEA data, India exports about 12 lakh bales of cotton annually to Bangladesh even as India’s own cotton balance sheet is tight (1 bale = 170 kg). With annual production of around 370 lakh bales, strong domestic consumption, export obligations across cotton, yarn and fabrics, and structural demand from its integrated value chain, India also imports nearly 50 lakh bales to bridge supply gaps.
Against this backdrop, questions have emerged over whether Bangladesh’s potential pivot towards US cotton, aimed at securing zero-duty benefits, might hit Indian farmers and spinners.
However, TEA’s Joint Secretary Kumar Duraiswamy downplays the risk for now. “The perceived threat of Bangladesh gaining disproportionate advantage through zero-duty access to the US market is largely overstated,” he says, arguing that India’s cotton fundamentals remain firm.
Duraiswamy further points out that India is not cotton-surplus even at current production levels. “India produces approximately 370 lakh bales of cotton per year. However, due to strong domestic consumption, obligations to export cotton, yarn, and fabrics, and structural demand from the textile value chain, India imports nearly 50 lakh bales annually to bridge supply-demand gaps. This clearly establishes that India is not surplus in cotton availability.”
With an FTA signed with the UK, advanced negotiations with the EU, and a forthcoming US pact, Duraiswamy expects export-led capacity expansion across spinning, weaving, processing and garmenting in the country. “As these FTAs come into effect, capacity expansion will accelerate. This will lead to higher domestic cotton consumption, further tightening supply,” he says, adding that India may need to increase imports rather than cut back.
Commerce Minister Piyush Goyal on Thursday (February 12, 2026) alleviated concerns by clarifying that Indian exporters would also get the same benefit as their Bangladesh counterpart. “Just as Bangladesh has a facility that if raw material is purchased from the US, then if you process it to make cloth and export it, then it will be available at zero reciprocal tariffs. India also has the same facility, and India will also get it. Right now, our framework agreement is being made. When the interim ..
The provision is not exclusive to Bangladesh. Under US tariff guidelines, any country using at least 20% US-origin inputs in finished goods can qualify for zero-duty access, explains Duraiswamy. “This provision is uniformly applicable to all countries, not Bangladesh alone,” he says, adding that Indian industry bodies have flagged this in ongoing bilateral discussions.
He is of the view that if India secures a similar framework under the US arrangement, it would be in a structurally stronger position. “If such an announcement materialises, India will be in a more advantageous position due to its integrated textile value chain, large-scale manufacturing capabilities, and ability to source, process, and export at scale.”
Even before the full operational details are out, exporters say cost volatility is already straining execution. Rohan Gupta, Managing Director & Chief Financial Officer at Gargee Designer’s, describes the Bangladesh deal as ‘an important event for the global textile landscape’.
“Ongoing duty-free access for Bangladeshi textiles into the US territory further consolidates their position as a cost-advantage player in the textile and apparel segment. It also adds pressure to the already low-margin competition of the mass segment of the textile trade,” he says.
However, Gupta sees room for strategic repositioning. “Indian textiles have a strong comparative advantage in high-value fabrics, design-centric garments and green manufacturing. As global buyers seek sourcing diversification, India’s compliance framework and ability to accommodate smaller orders could work in its favour.”
According to Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), it is premature to draw any conclusion, as the situation is “too fluid” and “fine prints are still awaited.”
Chandrima Chatterjee, Secretary General of the Confederation of Indian Textile Industry (CITI), underlines that the industry is still awaiting clarity. She notes a two-fold concern: the tariff differential between India and Bangladesh has halved from 2% to 1%—significant in a low-margin sector—and India’s cotton yarn exports to Bangladesh could be affected if sourcing patterns shift. Bangladesh is already among the leading suppliers to the US alongside China, Vietnam and India. “Any additional a ..
Vikas Singh Chauhan, Director at the Home Textile Exporters’ Welfare Association (HEWA), flags a more immediate challenge—rising domestic input costs. “The biggest issue here is that our cotton is very expensive. As soon as news of the India-US trade agreement broke, yarn rates went up by 5 to 10%. We can’t ship to those who have orders in hand because we won’t be able to cover the buyer’s costs,” Chuahan says, highlighting that exporters are struggling to execute confirmed orders amid cost spik ..
Overall, the US-Bangladesh deal may intensify competition in the mass garment segment and disrupt certain cotton and yarn flows. But industry voices suggest that India’s longer-term trajectory will depend less on a single tariff differential and more on how effectively it leverages FTAs, expands alternative markets and strengthens its position higher up the textile value chain.
Sanjay K. Jain, Chairman of the National Textile Committee at the Indian Chamber of Commerce (ICC), argues that while Bangladesh may enjoy incremental gains, countries, such as Vietnam, could feel sharper competitive pressure. “I would not say the India-US interim is a missed opportunity. Definitely, there are a lot of positives in it. Just because Bangladesh is potentially going to get something doesn’t mean that Indian trade agreements are nullified,” he says.
He acknowledges that India could partly lose out in cotton or yarn exports to Bangladesh and in certain open-access segments in the US. “But I don’t think we should be overly worried. India still retains advantages, and with FTAs with the UK and Europe, focus can shift there while the US market continues at its normal pace,” he adds.
Kanishk Maheshwari, Co-founder & Managing Director at Primus Partners, believes that while near-term pressures are visible, including downward stock reactions, the country’s structural strengths in this domain remain intact. India’s textile base spans cotton yarns, fabrics, home textiles, technical textiles and apparel, offering resilience that Bangladesh does not fully possess. “This development should be seen as a reminder that reinforces the need for Indian textiles to move up the value c ..
With rising domestic consumption and expanding export commitments, TEA’s Duraiswamy believes that the sector, in fact, stands to benefit. “This is a phase of opportunity, not risk, for Indian cotton and the broader textile ecosystem,” he says.
Source Name : Economic Times