US-Bangladesh Trade Agreement Sparks Crisis for Ludhiana's Textile Sector
A seismic shift in United States trade policy has sent shockwaves through the industrial heart of Punjab, as textile giants in Ludhiana warn of a structural collapse in competitiveness following a new trade understanding between Washington and Dhaka.
The Zero-Tariff Trap and Its Devastating Impact
The deal, which grants Bangladeshi apparel zero-tariff access to the US market provided they use American-grown cotton, threatens to undercut Indian exporters who remain shackled by average tariffs of 18%. This new arrangement creates a powerful incentive for Bangladeshi manufacturers to pivot their supply chains away from India. By sourcing yarn and cotton from the United States, Bangladesh can bypass the significant duties that currently apply to Indian-made garments.
Ludhiana's industry leaders say the 18% price gap is insurmountable in the low-margin world of global fashion. "Even small price differentials influence sourcing decisions in the U.S. market," one exporter noted. "An 18 percent gap could gradually erode India's market share entirely."
Massive Economic Fallout for India's Textile Economy
The United States is the cornerstone of India's textile economy, absorbing roughly 28% of all outbound shipments. The potential fallout is massive and far-reaching:
- India exports $10-11 billion (approximately ₹90,619 crore) in textiles to the US annually
- Ready-made garments account for half that export volume
- India currently supplies Bangladesh with $3 billion (₹25,050 crore) in raw cotton and $1.5 billion (₹12,525 crore) in yarn every year
If Bangladesh switches to US cotton to secure tax-free status, Indian spinning mills and farmers will lose their primary export customer, creating a devastating ripple effect throughout the supply chain.
Ludhiana's Hosiery Heartland at Severe Risk
As a premier hub for MSME-driven (Micro, Small, and Medium Enterprises) garment exports, Ludhiana is uniquely vulnerable to this trade policy shift. The World MSME Forum warns that global buyers are already reconsidering their sourcing strategies in light of the new agreement.
Badish Jindal, president of the forum, highlighted the domino effect on the local economy. Job losses will impact everyone from Punjab's cotton farmers and ginners to urban spinners and tailors, creating widespread economic distress. This distorted competition represents what industry experts call a "structural disadvantage" that systematically favours Bangladeshi factories over Indian MSMEs.
Industry Calls for Urgent Government Intervention
Industry leaders are urging New Delhi to fight fire with fire through strategic trade negotiations. The forum has called on the Indian government to negotiate "tariff parity" with the United States, arguing that Indian garments manufactured with US cotton should receive the same duty-free treatment as those from Bangladesh.
Without a balanced trade negotiation that addresses this fundamental inequity, exporters fear Ludhiana's hosiery and knitwear dominance could become a permanent casualty of Washington's new supply-chain diplomacy. The situation represents not just a temporary market disruption but a potential restructuring of global textile trade relationships that could have lasting consequences for India's manufacturing sector.
