The $140 Billion Gap: Can India's Denim Industry Overseas Expansion Catch Up with Bangladesh?

The global denim market is growing every year—valued at $19.7 billion in 2018, it is projected to reach $25.4 billion by 2025. Production capacity is also shifting outward, from China to Southeast Asia and then to South Asia. At this critical juncture, India's denim industry holds a strong hand: one of the world's largest cotton-producing regions, 45 million textile workers, and occasional foreign investment subsidy policies. But when it comes to actual export performance and supply chain efficiency, India is consistently outdone by neighboring Bangladesh.

A 2025 report from the Shanghai Institutes for International Studies put it bluntly: India has lost $140 billion in output from key low-skilled textile and apparel manufacturing, roughly 5% of India's GDP. The same report also highlighted a striking statistic—two-fifths of working-age women in Bangladesh are in the labor force, double the female participation rate in India. In short, the same human resources are available, but India has not used them effectively.

The global denim market pie is growing, but the ones cutting it have changed

First, look at the overall market. According to Precision Reports, global denim production rose from 5.49 billion meters in 2012 to 6.6 billion meters in 2016, with an average annual growth of 4.77%. By 2023, production is expected to exceed 9.1 billion meters. In terms of market size, the global jeans market was $64.5 billion in 2022 and is forecast to reach $76.1 billion by 2026, an annual growth rate of 4.8%. The U.S. market alone was approximately $15.8 billion in 2023.

The pie is getting bigger, but the largest producer has shifted from China to Bangladesh and India. As labor costs rise and environmental policies tighten in China, a large volume of orders has moved to South and Southeast Asia. Logically, India should be the most natural successor: a large population, cheap cotton yarn, and high English proficiency. But in reality, Bangladesh has taken the larger share.

Bangladesh's denim industry exported over $5 billion in 2022, with 42 factories nationwide producing 900 million meters annually. In 2022, exports to the EU were $1.56 billion, and to the U.S. $943 million. India, on the other hand, has total textile and apparel exports close to $40 billion, but denim alone does not have a publicly available subcategory figure that can be directly compared with Bangladesh. Some industry insiders estimate India's denim exports at around $2–3 billion—but even at that level, the gap is significant.

India's 'large but not strong' paradox: many workers, many subsidies, but factories not scaling up

India's textile industry provides 45 million direct jobs and 60 million indirect jobs, accounting for 2% of GDP and 7% of manufacturing output. Exports are nearly $40 billion, representing 12% of India's total exports. Foreign investment parks offer a range of incentives: the India-China Industrial Park provides infrastructure subsidies of 25% of investment, up to 3 billion rupees; worker dormitory subsidies cover 25% of construction costs, up to 2 billion rupees; and land purchase stamp duty is fully exempt. On paper, the conditions are not bad.

But the problem lies at the implementation level. India's textile industry is dominated by small-scale artisans and subcontractors, with few modern factories. A manufacturing owner operating textile production in both India and Bangladesh told the media: "Due to the constraints of India's small-scale artisan system and trade protection policies, the modern textile industry in India has never scaled up, and its international competitiveness is limited." This statement essentially captures the core issue—it's not a lack of capital, but policies that hinder scaling.

Chinese capital wants to invest, but the new FDI policy blocks the way

Over the past decade, it has been an open secret that Chinese textile and apparel companies are shifting production capacity to Southeast and South Asia. Denim mills from the Pearl River Delta and chemical fiber plants from Keqiao have moved in batches to Vietnam, Bangladesh, and India. But in April 2020, India amended its FDI policy—all investments from countries sharing a land border with India must go through government approval. In short, the path for Chinese companies was blocked.

Wan Jun, founder of Jilian Group, said in early 2025 that since the new policy took effect, very few Chinese enterprises have been approved, and the number of Chinese investments in India has plummeted. The Chennai Chenguang Industrial Logistics Park (covering 500,000 square meters with 260,000 square meters of factory space, with textiles as a leading industry) was a project that landed before 2020, and virtually no new parks have been established since.

Without the technology, management experience, and overseas channels brought by foreign capital, relying solely on local Indian companies to build their own brands for export is much slower. India's largest yarn and denim exporter, LNJ BHILWARA GROUP, is worth $1 billion and operates over 20 production plants. Others like RSWM LIMITED (Lahoti) export $27.36 million annually—a tiny fraction in the global market.

How did Bangladesh overtake? It's not just cheap labor

Many assume Bangladesh wins because of low wages. It is true—Bangladeshi workers earn about RMB 1,000 per month, compared to India's roughly RMB 1,500–2,000. But the bigger gap is in labor force participation, especially among women. Data from the Shanghai Institutes for International Studies shows that two-fifths of working-age women in Bangladesh are actually employed, compared to just one-fifth in India. The cost advantage of female labor, multiplied by population base, translates into enormous production flexibility.

Additionally, Bangladesh's textile industry has almost no internal protectionist barriers. The entire country depends on garment exports (over 80% of total exports), and policies fully support it. The EU has granted Bangladesh the Generalized Scheme of Preferences Plus (GSP+) for least developed countries since 2011, allowing zero-tariff access to the EU market—India does not enjoy this privilege. From January to September 2023, Bangladesh exported $885 million worth of denim to the EU and $556 million to the U.S. In full-year 2022, exports to the EU were $1.56 billion and to the U.S. $943 million. This volume is not something India can easily match in the short term.

Bangladesh's annual denim exports exceed $5 billion. What about India? There is no official subcategory data. But looking at total apparel exports from both countries: Bangladesh exported about $45 billion in apparel in 2022, while India exported about $40 billion—yet Bangladesh's population is only half of India's. The efficiency gap is decisive.

India still has cards to play

It would be unfair to say India is "completely failing." India's upstream cotton yarn resources are world-class. India is the second-largest cotton producer in the world (after China), with high cotton self-sufficiency and relatively manageable price fluctuations. India's yarn exports rank among the top globally. Large companies like LNJ BHILWARA and RSWM have technical and production capacity in denim.

On the policy side, the Indian government is indeed promoting textile industry upgrades. The Production Linked Incentive (PLI) scheme covers textiles with a total investment of over 100 billion rupees. Industrial parks like the India-China Industrial Park and the Chennai Chenguang Logistics Park still offer subsidies. But the issue is that these policies are often met with resistance from local governments and small-scale artisans during implementation. Protectionist attitudes lead to restrictions on imported fabrics and advanced machinery, ultimately hindering themselves.

Conclusion: India's overseas expansion must first break its own ceiling

India's textile and apparel industry has set a target of reaching $300 billion in exports by 2024–2025, increasing global market share from 5% to 15%. For denim, this would mean quadrupling output. Given the current policy environment, foreign investment inflow speed, and labor utilization rate, this target is basically unattainable.

The $140 billion output gap was not lost in a single day, nor can it be recovered in one day. For India to truly participate in the global denim supply chain overseas expansion, it must take the following steps:

• Liberalize FDI approvals, especially for textile-related investments from Chinese and Southeast Asian capital—technology and management experience are harder to replace than capital.
• Reform labor laws to encourage female employment, pushing the labor force participation rate from the current 20% toward 40%—Bangladesh has proven this approach works.
• Reduce tariffs on imported machinery and fabrics, allowing local factories to access advanced looms and finishing processes instead of protecting outdated capacity.
• Concentrate resources to support 3–5 leading denim companies to build brands and overseas channels, rather than encouraging thousands of small workshops to fend for themselves.

If these internal issues are not resolved, India's denim industry 'overseas expansion' will forever remain on PowerPoint slides—policy briefings, groundbreaking ceremonies, and then nothing. Meanwhile, Bangladesh is expanding capacity and building brands simultaneously, and the gap will only widen. Global apparel sourcing continues to move southward this year, and the window of opportunity will not wait.