The textile industry of Bangladesh is threatened to shut down from February 1, 2026. The reason? It’s because of the cheap imports of duty-free yarn. As a neighboring country of India, this shutdown may have a significant impact on the Indian textile industry. Also, Bangladesh has recently signed a new trade deal with the U.S., which makes its textile industry more competitive globally.
Many Indian textile stocks recently fell for a few consecutive days as investors got confused. But the question is: is this downtrend going to continue? Or will this shutdown actually benefit Indian textile stocks? Let’s dive deeper into this with Strategic Alpha’s investment experts:
The Bangladesh Textile Industry Shutdown Threat – How Serious Is It?
BTMA (Bangladesh Textile Mills Association) recently stated that the Bangladesh market is filled with cheap Indian yarn due to duty-free imports and policy issues. It’s difficult for the local millers to match this price of imported yarn because of high energy costs and the absence of VAT exemption. Considering all of this, BTMA has announced an indefinite nationwide shutdown of mills. Their demands for re-opening the mills include banning duty-free imports of yarn, reducing loan interest rates, providing tax holidays, and providing them with subsidised gas.
Bangladesh-U.S Trade Deal
It’s not just the shutdown news that is worrying the Indian investors, but also the trade deal that has been recently signed between Bangladesh and the U.S. Under this deal, the U.S. is giving Bangladesh some duty-free benefits on textile exports and lower tariffs. The clothes made in Bangladesh using U.S. cotton may get zero tax in the U.S. market. This is what scares the Indian investors, as this deal increases competition for India’s textile exporters.
Will the Indian Textile Industry Be Impacted?
Whether or not the Indian textile industry is impacted depends on Bangladesh’s decision. If Bangladesh actually bans duty-free imports to support its mills, the Indian exports to Bangladesh may decline. However, if Bangladesh continues to buy cheap yarn from India to keep its textile industry competitive, there will be no major impact on the Indian textile stocks.
Bangladesh is one of the biggest yarn importers from India. The country imported around 70 crore kilograms of yarn worth $2 billion in 2025, and nearly 78% of this was from India. This clearly indicates that Bangladesh’s textile industry is highly dependent on Indian yarn. If Bangladesh stops duty-free imports or if its spinning mills actually shut down, the garment industry will still require yarn imports. This will not negatively impact the Indian textile industry, but may drive up the demand for Indian yarn, particularly cotton and blended yarn, and their prices.
What Do Analysts Say?
Although the recent volatility of Indian textile stocks seems to be serious, analysts say that the impact on India will be most likely limited. Bangladesh has always been competitive in textiles. Whether the mills in Bangladesh shut down or not, it could potentially support demand for the Indian textiles industry as the shutdown of Bangladeshi mills may increase demand for Indian garments. If Bangladesh continued to import cheap yarn from India, it’s still going to benefit the Indian textiles industry.
So, according to analysts, the textile stocks may fall in the short-term, but the long-term impact is still uncertain. It will likely be moderate and not very serious.
Disclaimer: This article is for informational purposes only and should not be considered as investment advice. Strategic Alpha shall not be responsible for any investment decisions taken based on the information provided above in this blog.
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