Written by The Banking Post
India’s newly announced free-trade agreement with the European Union could emerge as a serious challenge to Bangladesh’s dominance in the European garment market, as Indian exports are set to gain wide-ranging tariff advantages.
The deal, reached after nearly two decades of negotiations, will grant Indian products preferential access to the EU’s 27 member states by eliminating or sharply cutting duties on a broad range of goods. Tariffs of nearly 12 percent on Indian textiles are expected to drop to zero, while duties on leather goods, marine products, handicrafts and jewellery will be reduced or removed.
The agreement was formally announced this week by Indian and EU leaders and is expected to come into force in 2027, subject to approval by the European Parliament, the European Council and India’s parliament.
India believes the pact will help it capture a sizeable share of Bangladesh’s garment exports to Europe — currently Dhaka’s largest single export destination. Bangladesh has enjoyed duty-free access to the EU since 1975 under its least developed country status, enabling it to become Europe’s second-largest apparel supplier after China.
In recent years, Bangladesh has overtaken China in several product categories, including denim, trousers and T-shirts. In FY25, more than half of Bangladesh’s total garment exports — valued at $19.71 billion — went to EU markets.
India, meanwhile, still trails Bangladesh in Europe’s apparel supply chain, ranking behind China and Turkey, with countries such as Cambodia, Vietnam, Pakistan, Morocco, Sri Lanka and Indonesia also competing for market share.
“With duty-free access, Bangladesh captured a $30 billion market,” India’s commerce minister said, adding that the EU deal could lift India’s textile exports to Europe from about $7 billion to as much as $30–40 billion.
Analysts warn that once Indian garments begin entering the EU at zero or sharply lower tariffs and at greater scale, Bangladesh may face increasing pressure on pricing and competitiveness in its core export market.
