India–EU FTA Redraws Textile Trade
After nearly two decades of negotiations, the conclusion of the India–European Union (EU) Free Trade Agreement (FTA) marks a decisive turning point for India’s textile and apparel (T&A) industry. For a sector that has long struggled with tariff disadvantages in its largest and most discerning export market, the FTA offers not just incremental relief but a structural reset—one that could reshape India’s position in global textile value chains.
EU is India’s largest goods trading partner, accounting for around 17 per cent of India’s total exports. Bilateral trade in goods stood at $ 136.5 billion in 2024–25, with India exporting $ 75.9 billion. Within this, T&As are among the top export categories. Yet, Indian textile and garment shipments to the EU have historically faced import duties ranging from 12 per cent to 16 per cent. This tariff burden has eroded competitiveness vis-à-vis rivals such as Bangladesh, Vietnam and Turkey, all of whom enjoy preferential or zero-duty access under EU trade arrangements.
The FTA fundamentally alters this equation. The EU will eliminate import duties on 90 per cent of Indian goods on the first day of implementation, with overall concessions covering 99.5 per cent of trade value. Textiles, apparel, clothing, leather and footwear figure prominently among sectors receiving immediate duty-free access. For an industry where margins are tight and price sensitivity is high, the removal of double-digit tariffs translates directly into sharper pricing, higher order volumes and improved supplier retention.
The scale of opportunity is significant. India’s apparel exports to the EU are estimated at over $ 4.5 billion annually, while textile and apparel clusters such as Tiruppur alone contribute nearly $ 1.74 billion—almost 23 per cent of India’s T&A exports to the bloc. With tariffs neutralised, India can realistically aim to claw back market share lost over the past decade, especially in categories such as cotton garments, home textiles, made-ups and value-added apparel. Beyond pricing, the FTA improves predictability and market access across all 27 EU member states, including key destinations such as Germany, Spain, Belgium, Poland and the Netherlands.
The timing of the agreement further amplifies its relevance. High tariffs imposed by the US have disrupted global trade flows, forcing Indian exporters to diversify markets. Simultaneously, European buyers are actively seeking to reduce over-reliance on China amid geopolitical and supply-chain risks. The India–EU FTA positions India as a credible, large-scale alternative sourcing hub for labour-intensive manufacturing—precisely where textiles and apparel sit.
However, tariff elimination alone will not guarantee gains. The EU remains one of the world’s most regulation-intensive markets, with stringent requirements around sustainability, traceability, chemicals, labour standards and circularity. While the FTA includes chapters on technical barriers to trade, sanitary and phytosanitary measures and intellectual property, Indian exporters will need to invest aggressively in compliance, certification and process upgrades. This is particularly relevant as the EU advances policies on sustainable textiles and extended producer responsibility.
In the medium term, the impact could be transformative. With EU duties on textiles and apparel reduced to near-zero from an average of 12–16 per cent, India’s export competitiveness improves overnight. For Indian textiles and apparel, the India–EU FTA is not merely a trade deal—it is a long-awaited correction of a structural disadvantage. The opportunity is substantial; the outcome will now depend on execution.
