A free trade agreement with the European Union would boost exports of garments and fabrics from India and help tackle competition from Bangladesh. While Bangladesh enjoys preferential treatment and tax benefits for textile exports in the EU, India has a greater competitive advantage in terms of environmental compliances. Countries of the EU lay huge importance to environmental compliances.

Once an agreement between India and the EU is in place, and exporters from India also get tax preferences, it would be easier to face competition from Bangladesh. The Indian textile industry is at a turning point. China’s export growth in textiles is decreasing and India is enjoying cost advantages, while it is also among the very few countries which have the entire value chain existing within the country. Several states are coming out with their own policy and incentive schemes for the textile sector.

FTA proposals have hit a roadblock. The negotiations were launched in 2007. There are some disagreements in areas such as duty cuts on automobiles, wines and spirits, data security status and easier temporary movement of services professionals.

The EU is India’s number one trading partner. India is the EU’s ninth trading partner. Among EU exports to India are engineering goods, gems and jewelry, other manufactured goods and chemicals. Among EU imports from India are textiles and clothing, chemicals and engineering goods.