Pakistan and Bangladesh have expressed concerns that the provisions of the proposed India–European Union (EU) trade agreement could adversely affect their export prospects, particularly in the textile sector, which forms the backbone of their exports to Europe. Both countries fear that duty-free access for Indian textile products to the European market will allow India to sell at more competitive prices, thereby eroding their market share.
Textiles account for the bulk of exports from Pakistan and Bangladesh to the EU. Pakistani industry bodies argue that once the trade agreement comes into force, Indian exporters will gain a decisive cost advantage. The Pakistan Textile Council (PTC) has urged the Shehbaz Sharif government to intervene urgently, suggesting that Pakistan should focus on increasing textile exports to the United States instead of relying heavily on the European market.
Pakistan currently exports goods worth around $9 billion annually to the EU, with textiles constituting nearly 65 per cent of this figure. Industry representatives say Pakistan is already facing difficulties competing with India’s improving quality standards and scale in textiles. They warn that the competitive pressure will intensify if India secures duty-free access under the proposed agreement. According to estimates cited by Pakistani traders, in 2024 Pakistan exported textile products worth $6.2 billion to Europe, while India’s textile exports to the EU stood at approximately $5.6 billion.
Until now, Pakistan has maintained an advantage in the European market largely due to duty-free access under the EU’s Generalised System of Preferences (GSP). This preferential status has enabled Pakistani exporters to offset higher domestic production costs. However, reports indicate that this exemption could be withdrawn or restricted in the near future, further weakening Pakistan’s competitive position. At present, Indian textile exports to Europe attract an average import duty of about 12 per cent. Under the proposed India–EU trade agreement, these duties would be eliminated, allowing Indian products to enter the European market at significantly lower prices. Pakistan Textile Council Chairman Fawad Anwar has warned that this shift could enable India to capture a substantial share of Pakistan’s European market.
Anwar has also pointed to India’s industry-friendly domestic policies as an additional challenge for Pakistan. He noted that the Indian government supports its textile sector through measures such as low-cost electricity, affordable raw materials, and targeted incentives. In contrast, Pakistan’s textile industry faces high electricity tariffs, heavy taxation, and rising input costs, which undermine its global competitiveness. Anwar cautioned that without immediate policy intervention, Pakistan risks losing the European market it has built over decades, potentially resulting in large-scale job losses and a sharp decline in foreign exchange earnings. Analysts estimate that Pakistan’s textile exports to Europe could decline by 5–10 per cent, amounting to roughly Rs 5,600 crore.
Beyond Pakistan, the proposed trade agreement is also expected to affect other major textile exporters to Europe, including Bangladesh, Vietnam, China, and the Philippines. Bangladesh, in particular, earned more than $16 billion from textile exports last year and has benefited significantly from duty-free access to the EU. However, reports suggest that this preferential treatment may end later this year, prompting concern among Bangladeshi exporters about their future competitiveness.
Meanwhile, Union Minister for Commerce and Industry Piyush Goyal has stated that India’s textile exports are projected to grow to $30–40 billion in the coming years. He noted that textiles are India’s second-largest employment-generating sector after agriculture, employing around four crore people. According to Goyal, implementation of the trade agreement could create an additional 60–70 lakh jobs in the sector. He also remarked that the agreement would alter the competitive landscape for countries that previously exported textiles to Europe under duty-free arrangements.
Markets rally on optimism over India–EU trade pact as exporters eye Europe to offset US tariff pressure
Indian equity markets extended their gains on optimism that the EU-India free trade agreement will help cushion the impact of high tariffs imposed by the United States on Indian exports. Sentiment strengthened further on Wednesday as more details of the agreement emerged. The benchmark Sensex closed at 82,344.68, up 487.20 points, while the Nifty rose 167.35 points to settle at 25,342.75. The Sensex touched an intraday high of 82,504 before some profit-taking slowed the pace of the rally after a two-day advance.
Market participants believe the India–EU agreement will open fresh opportunities for Indian exporters, particularly in sectors such as marine products, jewellery, pharmaceuticals and garments. The European Union is already one of the largest destinations for Indian garment exports, accounting for nearly 38 per cent of total shipments, and this share is expected to rise further once tariffs are reduced or eliminated. Companies are hopeful that part of the export slowdown in the US market, which accounts for around 33 per cent of India’s exports, can be offset through stronger access to the European market. This expectation has lent support to the shares of textile and apparel exporters in recent sessions.
Analysts note that India’s emphasis on diversifying export destinations, rather than over-reliance on a single market, could deliver long-term gains for export-oriented companies. HSBC Global Investment Research has said that the agreement is also likely to enhance investor confidence and attract higher levels of foreign investment into India, reinforcing the country’s position as a competitive global manufacturing and export hub.
