Low-Cost Garment Production: India Faces Tough Competition From Bangladesh

Labor unrest has continued for two consecutive weeks across various garment factories. On Saturday, September 14, 49 garment factories across the country were shut down due to workers' protests demanding various changes. On Thursday, September 12, 219 factories in Ashulia were closed, and many foreign orders have been canceled, raising concerns that this work might shift to India. This situation presents a significant challenge for the interim Bangladeshi government to control the unrest in the garment sector and restore normal operations.

A report published on September 11 by the international news outlet *The Economist* highlighted that despite being the world’s second-largest cotton producer, India lags behind Bangladesh in garment exports. In 2023, India exported a quarter of its cotton to Bangladesh. Recently, exporters in Tirupur, a textile hub in southern India, reported receiving $54 million worth of new orders due to the unrest in Bangladesh. Another group near Delhi mentioned receiving 15% more orders from the Spanish fashion firm Zara in August.

However, industry analyst Mehdi Mahbub believes that it will be challenging for Indian firms to capture orders from Bangladesh due to the current unrest. He told *The Economist* that the unrest in Bangladesh is short-term, with factories already resuming operations and conditions gradually improving.

'The Economist' report also argues that it will not be easy for India to capture Bangladesh's garment market. The report notes that Bangladesh’s garment sector enjoys significant advantages over its competitors, particularly lower labor costs and preferential access to the European market. Additionally, Bangladesh has extensive experience handling large orders, which other countries lack.

The report mentions that several worker organizations have taken to the streets with new demands under Dr. Muhammad Yunus’s leadership. The country is also struggling with power outages and reduced factory operations due to gas shortages. These issues are expected to cause a 10-20% decrease in overall garment exports this year.

The Bangladesh Garment Manufacturers and Exporters Association (BGMEA) claims the situation is improving rapidly. Although some buyers have temporarily shifted, major buyers still trust Bangladeshi suppliers. BGMEA Director Mahfuzur Rahman Rubel stated that while exact figures on the decrease in exports are not yet available, major brands continue to support Bangladesh. He acknowledged that while there may be temporary disruptions, the government’s support will help overcome these challenges.

Regarding the feasibility of India seizing this opportunity, *The Economist* suggests that India currently lacks the capability to compete effectively with Bangladesh. An internal source from India’s industry revealed that the country has focused more on investment-driven sectors like electronics rather than labor-intensive garment manufacturing. From 2016 to 2023, Indian garment exports decreased by 15%, while Bangladesh’s increased by 63%.

The World Bank’s report attributes this to India’s protectionist policies, which have raised average import duties on textiles and garments by 13 percentage points since 2017, increasing production costs.

India might see significant opportunities if low-cost garment production in China declines, but it will still face competition from Bangladesh. According to World Bank research, China’s reduction in low-skill production has most benefited Bangladesh and Vietnam.