Indian textile and apparel shares slid sharply on February 10 as investors digested a new trade agreement between the United States and Bangladesh that grants zero tariffs on certain garments assembled with U.S.‑sourced cotton or man‑made fibres, intensifying competitive pressures for Indian exporters in the world’s largest apparel market.
The U.S.–Bangladesh Agreement on Reciprocal Trade, concluded late last week after months of negotiation, lowered the overall tariff rate on Bangladeshi exports to 19 per cent and established a mechanism allowing specific ready‑made garment imports to enter the U.S. market tariff‑free if they meet criteria tied to American inputs. Bangladesh is the first South Asian country to secure such a provision, a development industry analysts say could shift sourcing patterns in favour of Dhaka’s factories.
India’s own tariff rate on textile and apparel exports under a separate interim framework with Washington was cut to around 18 per cent, but New Delhi has not secured zero‑duty access for any product categories, leaving Indian exporters at a competitive disadvantage in segments where Bangladesh may now undercut prices.
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Shares of major Indian textile companies including Gokaldas Exports, KPR Mill, Arvind, Pearl Global Industries and Vardhman Textiles tumbled by 3.5 per cent to 6 per cent during trading on Tuesday, with some counters briefly falling as much as 9 per cent as selling pressure hit the sector. The slump followed a recent rally in textile equities on hopes that U.S. tariff concessions for India would bolster export prospects.
“Investors are recalibrating expectations for export earnings as buyers may leverage tariff‑free access for specific products from Bangladesh,” said a Mumbai‑based broker, pointing to the zero‑tariff clause as a key concern. Analysts noted that even marginal differences in duty rates can significantly influence sourcing decisions in price‑sensitive apparel segments.
The Tata‑backed Confederation of Indian Textile Industry (CITI) described the tariff differential and zero‑duty window as a dual challenge, not only for finished garment exports but also for cotton yarn shipments, which could be squeezed as Bangladesh shifts sourcing towards U.S. inputs. Bangladesh already ranks among India’s largest cotton customers, but the new deal is expected to accelerate diversification, potentially reducing Indian suppliers’ traditional export base.
Some industry bodies and exporters, such as the Tirupur Exporters’ Association, signalled that the new U.S. provisions may prompt buyers to reassess order allocations, particularly for basic knitwear and mass‑market apparel categories where price competitiveness is paramount. In contrast, analysts advising on longer‑term prospects say India’s strengths in diversified export markets, including Europe and other regions, may help cushion the impact over time.
Market participants also pointed to broader trade dynamics that could shape the sector’s outlook. Indian textile exporters had pinned hopes on preferential access under an interim India‑U.S. trade framework, and more recently on a landmark agreement with the European Union that could enhance duty‑free access for Indian goods in a large market. Such developments may provide alternative growth avenues, even as the immediate market reaction reflects heightened uncertainty.
