India lacks capacity to seize ‘Bangladesh opportunity’ for ready-made garments, say experts

India lacks processing capacity to be able to eat into Bangladesh’s market for ready-made garments, experts have said.

“We simply do not have the processing capacity in the country to even handle a 20 per cent increase in demand. While the issue exists with other segments as well, it’s most stark in our processing ability. Our inability to import raw materials, caused by the Quality Control Orders programme, means we will be the last alternative port call for anyone trying to come out of Bangladesh,” says SK Sundararaman, Chairman, The Southern India Mills’ Association.

He told businessline that there would at best be a minimal positive impact for the Indian garment industry to capitalise on the current Bangladesh crisis. The issue is competitiveness through the value chain and capacity mobilisation.

Capacity augmentation policies need to be brought out on a warfooting to address these issues, he added.

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RMG exports

In 2023-24, Bangladesh’s RMG exports were more than three times that of Indian RMG exports. However, during Q1FY25 this ratio narrowed down to around 2.5, reflecting India cutting into the share of Bangladesh. Apart from the impact of socio-political upheavals in Bangladesh, this was also aided by various initiatives to enhance the competitiveness of Indian RMG exports, says a report by Care Edge.

Bangladesh’s RMG exports registered a 17 per cent de-growth in Q1FY25 on a y-o-y basis while Indian RMG exports have grown by 4 per cent during the same period.

In case of sustenance of the socio-political disturbance for more than one or two quarters, Bangladeshi exporters would face difficulty in ensuring on-time delivery to its customers. In such a situation, India is expected to gain monthly export orders of $200-250 million in the near-term. As global RMG brands and retailers are relatively stickier with their sourcing partners, a large part of this market share loss could be permanent and lead to a gain in monthly export orders of around $300-350 million in the medium-term, stated Akshay Morbiya, Assistant Director at CareEdge Ratings.

Considering RMG exports account for more than 80 per cent of Bangladesh’s total exports, it is expected that the country would try to quickly stabilise the prevailing situation so that their garments sector is not affected for a prolonged period, he said.

Capacity saturation

The US and Europe are the biggest markets for RMG.

Sudhir Sekhri, Chairman AEPC, says even before the current turmoil in Bangladesh, buyers were already looking for capacities elsewhere, due to capacity saturation in Bangladesh. The recent turmoil will expedite their plans. Indian factories will get a piece of the cake only if they ramp up capacities. However, buyers will continue to be hesitant to place their orders in India unless the government of India tweaks its import policies to allow greater and easier access to imported man-made fabrics, trims and accessories.

Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation, too emphasised on the need to build scale. “We need to build scale and competitiveness and specialisation in manufacturing,” he said.

China and Bangladesh both are competitive in their pricing particularly in the mass volume products. To win the cost game, India needs to design an incentive system at policy level to promote integration in apparel manufacturing. Ideally, large standalone spinning mills and semi integrated players can move towards forward integration and make low value apparels in large quantities and compete in cost with these two nations. Good scheme and policy push will drive the spinning sector to catch up this value addition theme, he said.

Raja M Shanmugham, former president of Tiruppur Exporters Association, said the first quarter dip of Bangladesh’s cannot be taken for granted in a normal situation. It could be made up in the subsequent periods. The disruption which is going to be there would have a telling impact on Bangladesh’s future business. Then India-like countries would certainly become the beneficiaries of it. Brands across the globe would certainly promote Bangladesh+ factor in their strategies hereafter, he said.