India–EU FTA gives Indian textiles zero-duty access, removing 10–12% tariff disadvantage
India targets leap from $7bn to $30–40bn in EU textile exports, boosting jobs
Bangladesh’s duty-free access drove its $30bn EU share; India now seeks parity
India is preparing to compete more aggressively with Bangladesh in the European market after concluding talks for a free trade agreement (FTA) with the European Union (EU) on Tuesday. The government said the pact would deliver a major boost to India’s labour-intensive sectors, particularly textiles.
Textiles is the second-largest job-creating sector in India, employing around 45mn people directly. Gaining zero-duty access in textiles and clothing, covering all tariff lines and reducing tariffs by up to 12%, would open up the EU’s $263.5bn import market.
1 January 2026
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Building on India’s current $36.7bn in global textile and apparel exports, including $7.2bn to the EU, such access is expected to significantly expand opportunities, particularly in yarn, cotton yarn, man-made fibre apparel, Ready-Made Garments, men’s and women’s clothing and home textiles.
Notably, neighbouring country Bangladesh has been able to capture $30bn of the EU's $250bn textile market. Commerce Minister Piyush Goyal said it was due to Dhaka's leverage as a least developed country.
"Bangladesh, being a least-developed country, has zero-duty access," said Goyal. "Now, we see before our eyes the potential to grow from $7 billion to at least $30bn, $35bn, or even $40bn very quickly in an area of strength for India. You can imagine that if we add this kind of business in the textile sector alone, we are looking at close to 6–7mn jobs in that sector. It has tremendous potential," he added.
Goyal also expressed confidence that a joint Europe–India manufacturing partnership — combining European technology with Indian skills — would help European firms scale up production, improve competitiveness and create jobs in both markets.
India's Textiles Market in EU
India has witnessed consistent market share losses in major EU textile import categories over 2018-24 to competitors that enjoy duty-free imports.
Prerna Jhunjhunwala, lead textile analyst at Elara Capital, said that the FTA directly addresses India’s competitive disadvantage by eliminating the 10-12% tariff gap that has enabled Bangladesh and Pakistan to gain share at India's expense.
In the EU apparel market, estimated to be at $96bn in 2024, India's share declined to 4.9% in CY24 from 5.8% in CY18. On the other hand, Bangladesh expanded its share to 21.4% from 19.4% over the same period. China retained dominance at 28.1%.
The trend is more pronounced in home textiles, where Pakistan has also systematically displaced Indian exporters.
In the EU towel market of $4.1bn, India's share contracted 204bps to 6.7% between 2018 and 2024, while Pakistan’s surged to 13.2% from 10.8% in the same period. China maintained leadership here as well at 43.8%, down 256bps from 46.4% in 2018.
The bedsheet segment, at $1.6bn, witnessed the steepest drop, where India lost 321bps to settle at 6.1%, as Pakistan aggressively captured share to command 62.9% versus 51.1% in 2018, an expansion of 1180bps that underscores the latter’s dominance in EU home textile sourcing.
"In a level-playing field market such as the USA, India dominates in the bedsheet and towel categories. With market shares of 55% and 45%, respectively, signifying the opportunity that can be grabbed in the EU," said Jhunjhunwala.
