As political tensions simmer between India and Bangladesh, the intricate textile trade relationship between the two South Asian neighbors hangs in the balance. Here is a look at the interwoven textile supply chain, the stakes, indispensable links, and potential vulnerabilities for both nations.

A symbiotic relationship

India and Bangladesh share a deeply intertwined textile trade relationship, characterized by complementary strengths. India dominates the upstream segment, providing raw materials like cotton, yarn, and fabrics to Bangladesh. Bangladesh, in turn, leverages its competitive labor costs to focus on downstream garment manufacturing, exporting finished apparel globally, including to India.

Table

Trade flow 2022-23 Value (% bn) Key items India to Bangladesh Exports $11 Cotton, yarn, fabrics, dyes, chemicals India from Bangladesh Imports $1.89 Ready-made garments, knitwear, home textiles

The two countries have some indispensible links. For example, Bangladesh's reliance on Indian inputs for garment industry, a cornerstone of its economy, means any disruptions in supply could cripple production and impact export commitments. Also, Bangladesh provides a significant market for Indian textile products, particularly yarn and fabrics. Losing this market share would deal a blow to Indian manufacturers. Bangladesh also has lower labor costs that make it an attractive destination for garment manufacturing. This benefits global brands and retailers, contributing to the affordability of clothing.

However, the country is seriously vulnerable now. These vulnerabilities include the political volatility. The current political climate has led to uncertainty and risk, potentially disrupting established trade flows. Any disruption in cross-border movement of goods could lead to delays, shortages, and increased costs for both nations. Moreover, both countries also face competition from other textile and garment producing nations, particularly in Southeast Asia.

What's at stake is their economic growth as the textile industry significantly contributes to the GDP and employment in both countries. Trade disruptions could have adverse economic consequences. Both nations also risk losing their hard-earned positions in the global textile and garment market if the current situation persists. And supply chain disruptions and increased costs could ultimately lead to higher prices for clothing and textiles globally.

Therefore, while certain aspects of the textile trade relationship are indispensable, both countries possess some flexibility. India could seek alternative export markets, and Bangladesh could explore sourcing raw materials from other suppliers. However, such shifts would likely involve higher costs and logistical challenges. Thus the current situation underscores the importance of diversification and resilience in textile supply chains. It also highlights the need for political stability and cooperation to ensure continued growth and prosperity for both India and Bangladesh.