New subsidies expose the fragility of Bangladesh’s post-LDC transition.
India has announced a ₹4,531 crore ($740m) export assistance package to cushion exporters against retaliatory tariffs imposed by the United States. The scheme—Market Access Support—will fund participation in overseas trade fairs, buyer–seller meets and promotional campaigns, with a particular focus on MSMEs and priority export sectors.
For Bangladesh, the move is unsettling. Exporters fear that India’s latest stimulus will intensify competitive pressure on Bangladesh’s textile and apparel industry—already squeezed by rising costs and the looming loss of trade preferences after LDC graduation in 2026.
According to Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), India has long underpinned its export sectors with low-cost industrial loans, land subsidies, labour incentives and infrastructure support. With borrowing costs around 6%, Indian producers enjoy a structural advantage. Bangladesh, he argues, has increasingly become both a legal and informal outlet for cheaper Indian yarn and fabrics, forcing domestic spinning mills to close.
The new assistance package revives an uncomfortable paradox. As part of its LDC graduation strategy, Bangladesh has begun rationalising subsidies and cash incentives to align with WTO disciplines. India, by contrast, exited LDC status long ago, yet continues to deploy aggressive export support. The result, exporters warn, is an uneven playing field at precisely the moment Bangladesh’s preferences are expiring.
Tensions are not limited to subsidies. India has previously restricted Bangladeshi garment transshipment facilities and channeled RMG imports through a limited number of land ports, thereby raising logistics costs. Combined with cheaper Indian raw materials and now direct export backing, these measures are eroding Bangladesh’s competitiveness in yarn, fabrics and mid-range apparel.
The policy implications are stark. Analysts argue that Bangladesh must recalibrate its post-LDC strategy—targeting support for spinning and man-made fibres, accelerating export diversification beyond the EU and US, and fast-tracking the Export Policy 2024–27. Without a response, exporters fear mill closures, weakened backward linkages and a shrinking share of the $500bn global apparel market.
In South Asia’s textile economy, subsidies may be unfashionable. But for now, they remain decisive.
