Textiles: Does India want to make Bangladesh an extension of its industrial base?
Diplomats discuss tariffs and cross-border fluidity. Textile manufacturers, however, are watching how these barriers actually change their costs, market opportunities and production choices.
By dispatching a delegation to Dhaka led by the Confederation of Indian Industry (CII), New Delhi is not just there to discuss market access for its neighbour. Behind the trade deficit between the two countries, a certain idea of Bangladesh's place in the regional industry is also being discussed in Dhaka today.
For a country whose export power relies heavily on apparel, the issue is no longer just about producing at the lowest cost and leveraging wage competitiveness. It is also about accessing markets, moving goods and attracting the capital needed to keep the industrial base running.
Led by Chandrajit Banerjee, the delegation of 18 leaders from the CII is in Dhaka until August 19. They are scheduled to meet with government representatives and the FBCCI, as trade relations between the two countries have recently become strained.
Discussions are focusing on market access conditions for Bangladeshi products in India, as well as on investment and industrial cooperation opportunities. According to Fibre2Fashion, Dhaka is particularly keen to see the removal of tariff and non-tariff barriers affecting some of its exports to India. These include jute products, hydrogen peroxide, and clothing and apparel products shipped by land.
The trade environment has indeed tightened. New Delhi recently imposed anti-dumping duties and other restrictions on several Bangladeshi products. For an industry as dependent on its exports as Bangladesh's, these measures are significant.
Clearly, the subject of this visit is not limited to tariffs.
A trade largely in India's favour
The figures immediately show the balance of power. In the 2025-2026 financial year, trade between the two countries reached approximately 12.36 billion dollars. India exported 10.56 billion dollars to Bangladesh, compared to only 1.78 billion dollars in the other direction, according to data cited by Fibre2Fashion and the High Commission of India in Dhaka.
Bangladesh's trade deficit with its neighbour therefore exceeds 8.7 billion dollars. The imbalance is not new. In 2023-2024, Indian exports to Bangladesh already reached 9.15 billion dollars, compared to 1.56 billion for Bangladeshi exports to India.
In this context, Dhaka's request is quite clear. It aims to gain greater access to the Indian market for its own products, while the Indian market is already a major outlet for Indian companies.
Dhaka is also seeking to attract more Indian capital. This is where the discussion becomes more interesting for the textile and manufacturing industry.
Making Bangladesh an industrial base for Indian companies
Md Fazlul Hoque, a director of the FBCCI and former head of the Bangladesh Knitwear Manufacturers and Exporters Association, argued during the visit for a stronger presence of Indian companies in Bangladesh. His reasoning is that Indian groups could produce locally to serve the Bangladeshi market, but also use the country as an export base to other markets.
Foreign investment could, on the one hand, bring capital and industrial capacity. On the other hand, the presence of Indian groups could help to expand the country's market opportunities and industrial connections.
For Indian companies, however, the calculation is different. Bangladesh already has a highly developed industrial apparatus in apparel, a skilled workforce and an export-oriented infrastructure.
Border between the two industries could thus become less distinct
India has a much more integrated textile industry, with capabilities in fibres, yarns, fabrics, machinery and chemicals. Bangladesh is much more specialised in garment manufacturing and export. Closer cooperation would theoretically bring these two links closer together rather than setting them against each other.
Bangladesh's problem is not just its production cost
This is also why talking about a simple loss of competitiveness for Bangladesh would be to mask the reality of the trade-offs being made. The country remains one of the world's major garment manufacturing platforms. Its problem is rather the value it manages to retain in a globalised production chain that is becoming more expensive and fragmented.
Wage cost is only part of the equation. Tariffs, transport times, energy costs, infrastructure, market access conditions and the availability of raw materials are now all part of the buyers' calculations.
A factory can remain competitive on its manufacturing cost and lose part of its advantage when the product reaches the border. This is precisely what gives weight to the current discussions with India. For Dhaka, obtaining better trade conditions is not just about selling a few more garments to its neighbour. It is about preserving the profitability of part of its production apparatus and, above all, its attractiveness to investors.
India can become an investor as well as a competitor
The presence of the CII delegation is indicative of the broader nature of the discussion. It brings together companies from the manufacturing, energy, engineering, pharmaceutical and health sectors, including Arvind; Godrej Industries; Mahindra Group; Larsen & Toubro; Forbes Marshall; Indian Oil and Apollo Hospitals.
Textiles are therefore not the only subject. The industry does, however, represent a particularly interesting case of a relationship that could evolve from a supplier-customer logic to one of cross-investment and regional value chains.
India is currently the eighth largest foreign investor in Bangladesh, with approximately 887.8 million dollars invested between 2001 and March 2025, according to figures cited by Fibre2Fashion. The amount remains modest in relation to trade flows, but it is precisely this gap that leaves room for growth.
For Dhaka, attracting more Indian capital would help to reduce this asymmetry somewhat. For Indian groups, Bangladesh offers an already structured industrial base in a sector where the country has considerable export experience.
What western buyers should be watching
For European and American brands, the interest of the matter lies a step further. Bangladesh remains an important part of global sourcing, but buyers' decisions are no longer based solely on the ex-factory price. US tariffs, trade tensions, new European requirements and the need to secure supply chains make the cost of a logistics chain much more complex to calculate.
In this new environment, the proximity between India and Bangladesh becomes an industrial advantage in itself. New Delhi provides raw materials, machinery and capital, while Dhaka provides its garment manufacturing expertise. In the long term, the two countries also represent natural markets for regional production.
This model does not mean that buyers will suddenly shift their production from China, Vietnam or Bangladesh to India. It suggests a more gradual evolution towards a less compartmentalised Asian chain between producing countries.
Real issue lies in capital flows
The Bangladeshi demand for the removal of trade barriers is therefore only part of the equation. The underlying issue is whether India and Bangladesh can transform a highly unbalanced trade relationship into a more integrated industrial one.
For Dhaka, the interest is clear. More investment, greater local added value and smoother access to the Indian market would strengthen an industry that remains essential to its exports. For New Delhi, the interest would be to have an industrial neighbour with which Indian companies can build regional production chains, while opening up new markets for their own capital and technologies.
The question of sourcing is thus gradually shifting. The choice of a production country no longer depends solely on its unit cost. It also depends on the quality of its trade connections, its ability to attract capital and the ease with which a company can move goods, raw materials and added value around it.
This is what gives the three-day meeting in Dhaka a scope that goes beyond mere trade relations between two neighbours. For Bangladesh, the challenge is less about becoming cheaper than about remaining attractive enough for manufacturers to want to continue investing there. For India, it is about deciding whether its neighbour should remain primarily a deficit market or become more of an extension of its own industrial base.
It is this second option that the CII delegation has come to test.