What Happened
- The Apparel Export Promotion Council (AEPC) has stated that fears about the Bangladesh-US zero-duty trade deal harming Indian cotton farmers are overstated, arguing that India is not at a competitive disadvantage.
- Under the US-Bangladesh Agreement on Reciprocal Trade (signed 9 February 2026), Bangladesh secured a reciprocal tariff reduction to 19% on most exports, with zero-duty access for textile and apparel goods manufactured using US-produced cotton and man-made fibres, on a "square-metre for square-metre" basis.
- AEPC has argued that with FTAs signed with the UK (CETA, July 2025), concluded negotiations with the EU (FTA, January 2026), and a forthcoming India-US comprehensive trade agreement, India is poised for a significant surge in textile and apparel exports.
- India's textile export target is USD 100 billion by 2030, up from USD 37.7 billion in FY25.
Static Topic Bridges
Free Trade Agreements (FTAs) — Types and India's FTA Architecture
A Free Trade Agreement (FTA) is an arrangement between two or more countries to reduce or eliminate tariffs, quotas, and other trade barriers on goods and services. India uses different nomenclature for its trade agreements: Comprehensive Economic Partnership Agreement (CEPA — e.g., with Japan, South Korea, UAE), Comprehensive Economic Cooperation Agreement (CECA — e.g., with Singapore), and Comprehensive Economic and Trade Agreement (CETA — with the UK). These differ in scope — CEPAs typically cover goods, services, and investment, while FTAs may cover only goods.
- India-UK CETA (signed 24 July 2025): Provides duty-free access for 99% of India's exports to the UK; covers textiles, leather, marine products, gems; expected to increase bilateral trade by GBP 25.5 billion
- India-EU FTA (concluded 27 January 2026): Opens zero-duty access to the USD 95 billion European market; India's current share in EU textile market is only 6% (USD 5.5 billion); Indian apparel exports expected to grow 20-25% annually post-operationalisation
- India-US Interim Trade Agreement (framework announced 6 February 2026): Reciprocal tariff of 18% on Indian goods (down from 50%)
- India-UAE CEPA (effective May 2022): India's first bilateral CEPA in the Gulf region
Connection to this news: India's FTA strategy with the UK, EU, and US directly counters the competitive threat from Bangladesh's zero-duty US access. While Bangladesh gets tariff-free entry for apparel made with US cotton, India's FTAs provide broader market access across multiple destinations and product categories, giving India a diversified export advantage.
India's Textile and Apparel Industry — Structure and Policy Framework
India's textile sector is the second-largest employer after agriculture, providing direct employment to over 45 million people. The industry spans the entire value chain — from fibre (cotton, jute, silk, synthetic) to yarn, fabric, and garments. India is the world's largest producer of cotton and the second-largest exporter of textiles and apparel.
- India is the world's largest cotton producer, accounting for approximately 25% of global production
- Textile exports in FY25: USD 37.7 billion; target: USD 100 billion by 2030
- Key policy support: PLI Scheme for Textiles (Production Linked Incentive, launched 2021, outlay Rs 10,683 crore for MMF apparel, MMF fabrics, and technical textiles); PM MITRA Parks (Pradhan Mantri Mega Integrated Textile Region — 7 greenfield parks with plug-and-play infrastructure)
- Ministry of Textiles is the nodal ministry; AEPC (Apparel Export Promotion Council) and TEXPROCIL (Cotton Textiles Export Promotion Council) are the principal EPCs
- Competitors: Bangladesh (RMG exports ~USD 40 billion, heavily concentrated in garments), Vietnam, Cambodia
Connection to this news: AEPC's confidence stems from India's structural advantage: domestic raw material availability (India grows its own cotton, unlike Bangladesh which imports it), a diversified product range, and upcoming FTA-driven tariff parity in major markets. The Bangladesh-US deal's zero-duty is conditional on using US cotton, which limits its scope.
Rules of Origin in Trade Agreements
Rules of Origin are criteria used to determine the country of origin of a product in international trade. They are critical in preferential trade agreements because they prevent "trade deflection" — where goods from a non-member country are routed through a member country to exploit lower tariffs. Rules of Origin typically include: value addition threshold (e.g., 35-40% domestic value addition), change in tariff classification, and specific processing requirements (e.g., yarn-forward, fabric-forward rules in textiles).
- The Bangladesh-US deal uses a "square-metre for square-metre" formula: zero-duty access is granted for apparel in direct proportion to Bangladesh's imports of US-produced cotton and man-made fibres
- This is effectively a "yarn-forward" rule linked to sourcing from the US — apparel must use US raw material inputs
- India-ASEAN FTA faced criticism for liberal rules of origin allowing Chinese goods to enter India via ASEAN countries
- WTO Agreement on Rules of Origin aims to harmonise non-preferential rules, but preferential rules remain bilateral/regional
Connection to this news: The Rules of Origin mechanism in the Bangladesh-US deal is the key reason AEPC considers the zero-duty threat overstated: Bangladesh must purchase US cotton (displacing Indian cotton exports to Bangladesh) to qualify for zero duty, which imposes a sourcing constraint and limits the volume of apparel eligible for tariff-free access.
Key Facts & Data
- Bangladesh-US Agreement on Reciprocal Trade: signed 9 February 2026; reciprocal tariff reduced to 19%; zero-duty for apparel made with US cotton
- India-UK CETA: signed 24 July 2025; 99% of India's tariff lines get duty-free UK access
- India-EU FTA: concluded 27 January 2026; covers USD 95 billion European market
- India-US interim trade deal framework: announced 6 February 2026; 18% reciprocal tariff
- India's textile exports FY25: USD 37.7 billion; target: USD 100 billion by 2030
- India's share in EU textile market: approximately 6% (USD 5.5 billion)
- Bangladesh committed to purchase approximately USD 3.5 billion of US agricultural products and USD 15 billion of energy products over 15 years under its US deal