While talks of an alliance between Pakistan, Bangladesh and India in the textile sector is doing the rounds, eastern European nations, especially Turkey, is giving India a tough time in the European Union markets.
In the post-quota period, EU has emerged as a more lucrative market than the US with a considerably less fall in prices.
At the same time, the US offers a more expansive market, which can be gauged by the massive swamping of the market by China and a sharp drop in prices. While China has run away with the US market, India is facing stiff competition from Turkey, Poland and Romania in the EU.
Further, with the Baltic states joining EU in May 2004, there are also chances of intra-EU trade going up at the cost of the extra-EU nations which may adversely affect India's growth prospects.
India also stands to lose a lot due to the various Free Trade Agreements and Generalised System of Preference, which favour competitors like Turkey, Romania, Canada, Mexico and the eastern European nations.
A textile ministry official says, "Preferential Trade Agreements are not in our control but we are at a disadvantage because of them." The industry believes that India has not been able to make much inroads into Europe and part of it can be attributed to the East European nations.
"Turkey has the natural advantage in proximity to the market and duty free access," said Orientcraft managing director Sudhir Dhingra.
"Ultimately we need decrease delivery time and pursue preferential access treaties with the European counterparts."
The scenario in EU in Q1 this fiscal highlighted that in volume terms India stands fourth in the list of clothing importers with Turkey and Bangladesh ahead and Romania right behind. Turkey is ahead of India in textile imports to EU as well and experts believe it's the GSP that is making a difference here.
"India scores above most of its competitors in easy availability of raw material but preferential trade agreements and market proximity make up for it," said Textile Intelligence Editorial Director Robin Anson at the CII Textile Summit.
"India's low labour cost advantage has also been blunted to some extent by countries like Turkey, Thailand and Bulgaria who have comparable labour costs," he added.
During 1995-2004, import prices both for textiles and clothing in the US fell over 25 per cent. The fall in EU was comparatively less severe at 15 per cent during the same period.Even at a micro level, average prices in the first quarter of this fiscal have only fallen modestly in the EU while in the US, the fall has been more pronounced. With the demand slackening in Europe and competition intensifying in US, import prices are expected to fall further in US.