India’s exports of cotton and cotton products, such as yarn and fabric in 201-17 to China, the world’s largest textile and garment exporter, dropping to $416.14 million, while those to Bangladesh touches $613.16 million in the first half of the current fiscal according to official data. Bangladesh may emerge as the largest importer of such item for the first time to China.

As late as 2011-12, China’s purchases of cotton and cotton products from India were almost four times of Bangladesh’s. In fact, cotton and cotton products had remained India’s largest segment of export items to China for years, accounting for 19-26% of the country’s total supplies to the bigger neighbour until recently. In the first half of this fiscal, though, such items made up for a meager 10.5% of the country’s overall goods exports to China.

The slowdown has been driven by China’s offloading of massive official stocks to consuming industries and a discernible withdrawal from labour-intensive sectors such as textiles and garments due to soaring costs, senior. With demand from China remaining subdued, India’s exports of such items to that nation are unlikely to rebound anytime soon, senior government and industry officials said.

According to a recent report, of the US-based International Cotton Advisory Committee (ICAC), year-ending stocks in China dropped 13% to 11.3 million tonnes in 2015-16 (marketing year that runs from October through September), as the government there sold over 2 million tonnes from its official reserves from May through September 2016. In addition, the government is planning to begin sales from its reserves in March 2017 when the majority of the new crop will have been sold, the ICAC said.

According to textile expert DK Nair, higher Indian supply to Bangladesh suggests growing appetite of the tiny neighbour which has been aggressively courting foreign companies —including the Chinese, Indian and Pakistani.

In recent years, Arvind Mills in a joint venture with Nitol group has expanded its denim manufacturing capacity by setting up a plant in Bangladesh in a joint venture with Nitol group. Also, Chennai-based apparel manufacturer Rattha Overseas, Jay Jay Mills of Tirupur and Mumbai-based Creative Casuals, among others, have firmed up plans for sourcing from Bangladesh.

Bangladesh is increasingly becoming a regional garment hub due to low costs, availability of semi-skilled manpower, easy labour rules, and most importantly, duty-free access to some of the lucrative markets such as Europe and the US due to its status of a least-developed country.

While, Indian exporters have to pay duty in the range of 14-32% for the shipment of textiles and garments to the US. This has prompted some Indian companies to set up shop in Bangladesh in recent years.