Bangladesh’s Textile Paradox: Dependence on Indian yarn amidst ambitions for self-sufficiency

Bangladesh’s ready-made garment (RMG) industry, the world’s second-largest apparel exporter, is a model of industrial success. Yet, behind this global triumph lies a deep-rooted dependence that complicates its ambitions for strategic autonomy—its reliance on imported yarn, particularly from neighboring India. This dependence is more than a logistical arrangement; it is a paradox that reveals both the strengths and vulnerabilities of Bangladesh’s textile economy.

The dependence dilemma

Bangladesh’s RMG sector has flourished over the last four decades, becoming the backbone of the country’s economy by contributing over 80 per cent of total export earnings and employing more than four million workers. However, over 95 per cent of its cotton yarn imports come from India. This overwhelming reliance stems from several interwoven factors.

Cost competitiveness: Indian yarn is not only abundant but often priced 20–25 cents per kg lower than alternatives, a vital factor in an industry built on thin margins.

Geographical proximity: Indian suppliers can deliver yarn within two to three days, compared to 35–45 days from far-off countries like the US or China—a critical advantage in the fast-fashion era.

Historical ties: After gaining independence in 1971, Bangladesh was cut off from yarn supplies from erstwhile West Pakistan, leading it to develop trade links with India, a partnership that continues to this day. Interestingly, despite these benefits, this dependence has led to trade tensions, and more critically, exposed the vulnerability of Bangladesh’s textile supply chain.

Why not manufacture more yarn locally?

Several internal challenges prevent Bangladesh from significantly boosting domestic yarn production. First is the land constrains as with a high population density, Bangladesh prioritizes arable land for food production, leaving little room for cotton cultivation. Add to it is the limited cotton output. Domestic cotton fulfills only about 2 per cent of total demand, necessitating large-scale imports. Meanwhile, rising gas prices, labor wages, and loan interest rates have raised the operational costs of local spinning mills, reducing their competitiveness. Man-Made fiber too has bottlenecks although Bangladesh is exploring alternatives like polyester and recycled fibers, the absence of essential inputs such as MEG and PTA remains a hurdle. And there are the policy gaps. Past policy frameworks have arguably been skewed toward facilitating imports rather than incentivizing domestic production capacities.

Numbers tell the story

A closer look at recent trade data offers a quantitative snapshot of the gap between domestic supply and total demand:

Table: Bangladesh's cotton yarn dynamics (value & quantity)

The data underscores a consistent and widening gap between local production and demand, illustrating why Bangladesh’s textile industry remains so dependent on imports—particularly from India.

Recent developments and impact

Efforts to address this imbalance are gradually gaining momentum. The Bangladesh Textile Mills Association (BTMA) has suggested that reducing Indian yarn imports by half could create up to 500,000 new jobs. Trade tensions too have escalated as Bangladesh recently banned yarn imports via land ports, citing concerns about under-invoicing and unfair trade practices. While sea ports remain operational, the move has heightened bilateral trade sensitivities. Moreover, routing imports through sea ports may improve quality assurance by ensuring tighter controls on specifications and compliance.

Bangladesh is now importing more US cotton and exploring newer trade partners to avoid overdependence on a single source. And with global markets increasingly demanding sustainable fashion, Bangladesh is investing in recycling technologies, particularly in producing yarn from plastic bottles. Several pioneering Bangladeshi firms are investing in circular economy models, converting PET plastic bottles into yarn and fabrics. This approach not only reduces environmental impact but also offers a strategic alternative to traditional cotton, positioning Bangladesh as a forward-looking player in sustainable fashion.

Bangladesh now stands at a crossroads. To secure its place as a global apparel leader while reducing vulnerabilities, it must therefore, scale up investment in domestic spinning infrastructure and promote cotton and alternative fiber cultivation wherever feasible. It also has to focus on implementing favorable industrial policies, including tax incentives for local manufacturers and unvest in research, innovation, and environmentally sustainable production technologies. And most importantly it must strengthen trade diversification to mitigate geopolitical and market risks.