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India loses market share to Pakistan in Europe due to GSP

India has lost market share in textiles over the last two years in the European Union to Pakistan. Preference to certain countries through tax exemption in developed markets to boost trade from that country has given the later a boost.

In 2014, the European Union included Pakistan to the list of GSP which allows duty-free access to EU markets for textile exports. Consequently, exporters from Pakistan are now able to ship fabrics, made-ups and garments with no tariffs. Indian exporters, however, must pay 9.6 per cent export duty for made–ups and garments, and 6.5 to 8 per cent duty on fabric items, making exports from India more expensive.

This duty anomaly, along with other issues, has resulted in slow pick-up of garments and fabrics from India as compared to Pakistan. India has already lost market share to Pakistan in 19 textile and 18 clothing products (37 products in all) during the calendar year 2014 due to the preferential access extended by the European Union to that country under the Generalised System of Preferences (GSP) plus scheme.

Even though the textile sector is at the forefront of creating employment in India, the cotton textile business is fast losing its market share worldwide. The textile industry feels issues relating to exports such as cost of funds and adverse impact of preferential access given to competing countries need to be addressed on a war footing.