India-Bangladesh Textile Ties Face New Test as Indian Exports Eye Europe

India’s contribution to Bangladesh’s rise as a global garment powerhouse is deeply rooted in history, economics, and strategic cooperation. From standing firmly beside Dhaka during the 1971 Liberation War to quietly supporting its post-independence economic reconstruction, New Delhi played a decisive role in shaping Bangladesh’s modern development story. Central to that journey was the ready-made garments (RMG) sector—an industry that lifted millions out of poverty and transformed Bangladesh into one of the world’s largest apparel exporters.

However, the very sector India helped nurture is now poised to face stiff competition from Indian exports, particularly in Europe, as global trade equations shift and bilateral relationships undergo strain.

In the early years after independence, Bangladesh was grappling with extreme poverty, shattered infrastructure, and economic uncertainty. India stepped in with humanitarian assistance, financial aid, and diplomatic backing. In just the first half of 1972, India extended aid worth hundreds of millions of dollars, emerging as Bangladesh’s largest donor at the time. Over subsequent decades, that support evolved into a dense economic partnership.

A cornerstone of this cooperation was textiles. Bangladesh possessed abundant low-cost labour but lacked spinning capacity and raw material security. India filled that gap by supplying high-quality cotton yarn at competitive prices, ensuring uninterrupted inputs for Bangladesh’s garment factories. Duty-free access under regional trade frameworks, logistical support through Indian ports, and reliable transshipment routes further strengthened Bangladesh’s export competitiveness, particularly in the European Union.

This ecosystem allowed Bangladesh’s garment sector to flourish, eventually accounting for over 80 percent of its exports and employing millions directly and indirectly. International investors viewed Bangladesh as operating under India’s strategic and economic umbrella, lending confidence to long-term investments.

That equilibrium, however, has begun to fracture.

Political changes in Dhaka since mid-2024 have altered bilateral dynamics. Economic uncertainty, rising inflation, energy shortages, and deteriorating investor confidence have pushed Bangladesh’s textile sector into distress. Several mills have shut down, unsold inventories have piled up, and millers have threatened nationwide shutdowns amid mounting losses. Gas shortages and power disruptions have further weakened production capacity.

At the same time, trade ties have cooled. Indian exports to Bangladesh declined in 2025, connectivity initiatives remain suspended, and long-standing economic coordination has slowed. Bangladesh’s internal debates have increasingly framed Indian yarn imports as harmful to domestic spinning units, even as garment exporters insist that Indian inputs remain essential for quality and global competitiveness.

Against this backdrop comes a major shift in global trade.

India’s proposed free trade agreement with the European Union is expected to eliminate high tariffs on Indian textiles and apparel, opening the door for a significant expansion of Indian exports in Europe. Until now, Bangladesh enjoyed a clear advantage due to its duty-free access as a least developed country. That edge is set to narrow as Bangladesh prepares to graduate from LDC status and India gains preferential access through the FTA.

For Indian exporters, the agreement represents an opportunity to reclaim lost ground in global apparel markets. For Bangladesh, it signals the possibility of intensified competition in its most crucial export destination.

What makes this moment particularly significant is its irony. India helped build the supply chains, inputs, and conditions that enabled Bangladesh’s garment success. Now, as India strengthens its own manufacturing base and secures better market access in Europe, both countries may find themselves competing head-to-head in the same space.

The shift does not mark the end of cooperation, but it underscores how geopolitics, policy choices, and trade agreements can redefine long-standing economic relationships. The “battle of the weaves” in Europe reflects not hostility, but the evolution of two intertwined economies navigating a rapidly changing global trade order.