Indian Textile Stocks Slide on New U.S.-Bangladesh Trade Deal

Shares of major Indian textile and apparel companies fell sharply for a second consecutive day this week. The sell-off saw stock prices drop by as much as 6%, reflecting investor anxiety over a new trade development in the region.

The decline follows the signing of a new trade and investment agreement between Bangladesh and the United States. This pact is expected to offer Bangladeshi textile exporters lower tariffs and certain exemptions when shipping goods to the large U.S. market.

Understanding the Competitive Threat

For years, India and Bangladesh have been key competitors in the global textile and garment export industry. Both countries offer large, skilled workforces and are major suppliers to Western brands and retailers. The new U.S.-Bangladesh deal could shift this balance by making Bangladeshi products more price-competitive in the United States, one of the world’s biggest importers of clothing.

Investors fear that Indian exporters could lose market share if their Bangladeshi rivals gain a significant cost advantage due to lower tariffs. This concern triggered the immediate sell-off in stocks of prominent Indian textile firms.

Experts Urge Caution, Point to Limited Overall Impact

While the market reaction was swift, several industry analysts and experts suggest the long-term threat to India’s textile sector may be more contained. They point out that the impact will likely be concentrated in specific product categories where India and Bangladesh compete most directly, such as basic knitwear and woven garments.

India’s textile industry has broader strengths that may insulate it. These include a fully integrated supply chain—from raw cotton to finished fabric—which Bangladesh lacks. India also exports a wider range of value-added products, technical textiles, and home furnishings where it holds a strong position.

Furthermore, many large Indian manufacturers have already diversified their export destinations or set up production facilities in other countries, including Bangladesh itself, to mitigate such trade risks.

Context and Long-Term Strategy

The market volatility highlights the sensitivity of export-driven sectors to global trade policies. Similar concerns have arisen in the past with trade agreements involving Vietnam and other Asian manufacturing hubs.

For India, the situation underscores the importance of its own ongoing trade negotiations with countries like the United Kingdom and the European Union. Securing favorable trade terms for its own exports remains a critical long-term goal for the industry.

In the immediate term, Indian textile companies may face increased competitive pressure on certain high-volume, low-margin items. However, the sector’s fundamental structure and diversification are seen as buffers against a severe, widespread loss of business. Investors will be watching closely for any signs of order shifts or pricing pressure in the coming quarters.