India must significantly scale up its garment manufacturing capacity to take full advantage of potential tariff benefits in the US market, said Prerna Jhunjhunwala, Vice President at Elara Capital, in an interview with CNBC-TV18.
“Bangladesh is definitely ahead of us in terms of scale today. They are at around $40 billion in overall garment exports to the world, compared to India, which is at about $17 billion,” she said. Jhunjhunwala pointed out that India could gain a crucial edge over key competitors like Bangladesh and Vietnam if it manages to secure a trade deal with the United States. “As of now, without a trade deal, we are at 26% after the baseline tariff is over. But if we sign a trade deal, we are confident that the tariff rate for India would be lower than these two countries,” she noted.
While Bangladesh enjoys a labour cost advantage—paying about $115 per month compared to India’s $150–170—the gap could be offset by lower tariffs for Indian exports. “That translates to a disadvantage for India’s cost structure of about 10–12%, which gets offset if the tariff rates are higher for Bangladesh compared to India,” she explained. In terms of market share, Bangladesh commands 9.3% of the US apparel import market, worth around $7.3 billion, while India stands at 5.9%, or approximately $4.7 billion. “So, we have a differential of about 4% in total US apparel imports, and that’s where the opportunity lies,” said Jhunjhunwala.
Despite reports of a pickup in demand for spinning mills, Jhunjhunwala said the current outlook remains subdued. “Orders from US markets are not at the same level as earlier. Export markets are not very favourable currently… we’re not seeing any major improvement or large order inflows for Indian spinners at this point in time.” On the investment front, Elara’s top pick in the textile space is Arvind Ltd. In home textiles, Jhunjhunwala favours Indo Count and Welspun, which she said are well-positioned to benefit from India’s ongoing free trade agreements. “India is not just a story of US tariff differentials—it’s also about the structural opportunity from FTAs being signed globally,” she added.
News Courtesy : Cnbctv18