Indian textile and spinning companies experienced significant selling pressure on Tuesday following the conclusion of the US-Bangladesh trade deal. According to The Economic Times, Gokaldas Exports led the decline, tanking 6% to its day's low of ₹792 on the BSE, while KPR Mill was down 4.5% to its day's low of ₹935 per share. Pearl Global shares declined 6% to ₹1,692 per share, Indo Count fell 3%, Raymond Lifestyle shares edged lower by 2%, and Welspun Living plummeted 5% to ₹137 per share. The stocks had been in focus due to the adverse impact expected from the new trade agreement. As per CNBC TV18, textile shares including Gokaldas Exports, Welspun Living, Arvind, and KPR Mill were trading 3.3% to 4.5% lower around 10.20 am on Tuesday, while Indo Count was marginally up. Market participants expect an initial sentiment-driven reaction rather than material impact on earnings.
The US-Bangladesh trade deal concluded on Monday evening, reducing overall tariff rates to 19% from 37% previously, including reciprocal tariffs. As reported by The Economic Times, the agreement includes a significant provision that textile exports from Bangladesh will receive 0% tariffs and duty only if the textile is produced using US cotton. This development is expected to adversely impact India's textile exports to the US market. According to CNBC TV18, Muhammad Yunus, the chief adviser heading Bangladesh's interim government, confirmed that Washington had "committed to establishing a mechanism for certain textile and apparel goods from Bangladesh using US-produced cotton and man-made fibre to receive zero reciprocal tariff in the US market". The White House statement confirmed that "the United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate". Finalised on February 9, 2026, the pact reduces US tariffs on Bangladeshi goods to 19% and grants zero-duty access to specified volumes of garments made using US-origin cotton and man-made fibres, subject to sourcing conditions.
Bangladesh has made a strategic shift in cotton imports, with Brazil now accounting for 23-24% of total cotton imports to Bangladesh, followed by India at 15%, West Africa at 15-20%, and the US at 7-10%. According to the report, this composition is expected to change following the trade deal, potentially tilting Bangladesh's cotton sourcing more toward the US. Bangladesh remains one of the crucial trading partners for the US in terms of textile imports. As per CNBC TV18, India has traditionally been the largest supplier of cotton and yarn to Bangladesh, which relies heavily on imported raw materials for its export-oriented garment industry. Any sustained shift by Bangladeshi manufacturers towards US-origin fibre could affect demand for Indian raw material exports.
The trade deal is expected to impact India's textile industry in two key areas. As reported by The Economic Times, India's cotton exports to Bangladesh will diminish further, with Bangladesh accounting for more than 70% of Indian cotton exports. Additionally, Indian textile exports to the US could become less competitive, as India's apparel and textiles exports to the US currently hold a single-digit share of 5-6%, less than Bangladesh and Vietnam's 9-10% share. The provision makes Bangladesh textile exports more affordable if produced with US cotton. According to CNBC TV18, Bangladesh's ready-made garment sector accounts for more than 80% of its export earnings, employs around four million workers (mostly women) and contributes about 10% to GDP, with the US being its single largest export market. India's garment exports compete directly with Bangladesh in the US market, where Bangladesh benefits from lower manufacturing costs. India exports about 12 lakh bales of cotton annually to Bangladesh even as India's own cotton balance sheet is tight (1 bale = 170 kg).
Industry experts suggest the impact may be limited due to Bangladesh's structural advantages. As per CNBC TV18, Pallab Banerjee, Managing Director and Group President at Pearl Global, said Bangladesh was already structurally more competitive than India due to its integrated ecosystem, lower manufacturing costs and better infrastructure. He noted that "Bangladesh was always more competitive than India. This kind of deal will make it incrementally more competitive, but I don't see this as a massive change". Mayuresh Joshi, Director-Research at Marketsmith India, said integrated Indian textile players—those with presence across the value chain from yarn to fabric—are better positioned to absorb competitive pressures. Companies like KPR Mill and Vardhman Textiles are relatively better placed, as are those with greenfield investments and US manufacturing capabilities. RK Vij, National President of the Textile Association of India, said India's textile industry is positioned to redirect material supplies to other regions, noting that exports currently stand at about $3.5 billion, including roughly $1.8 billion in cotton and yarn.
Commerce Minister Piyush Goyal on Thursday (February 12, 2026) alleviated concerns by clarifying that Indian exporters would also get the same benefit as their Bangladesh counterpart. As reported by ANI, "Just as Bangladesh has a facility that if raw material is purchased from the US, then if you process it to make cloth and export it, then it will be available at zero reciprocal tariffs. India also has the same facility, and India will also get it. Right now, our framework agreement is being made. When the interim agreement is finalised, you will get to see this in the fine print". Sanjay K. Jain, Chairman of the National Textile Committee at the Indian Chamber of Commerce (ICC), argues that while Bangladesh may enjoy incremental gains, countries, such as Vietnam, could feel sharper competitive pressure. He acknowledges that India could partly lose out in cotton or yarn exports to Bangladesh and in certain open-access segments in the US, but believes "India still retains advantages, and with FTAs with the UK and Europe, focus can shift there while the US market continues at its normal pace". Kanishk Maheshwari, Co-founder & Managing Director at Primus Partners, believes that while near-term pressures are visible, including downward stock reactions, the country's structural strengths in this domain remain intact.
