India’s recent Free Trade Agreement (FTA) with the UK, which eliminates tariffs on garments, presents a significant opportunity for the nation’s textile and apparel industry. Similar FTAs with major markets like the EU and USA could further propel exports, generate employment, and enhance India’s global competitiveness in this crucial sector. An FTA is essentially a pact between countries designed to boost economic cooperation and market access by reducing or removing trade barriers like tariffs and quotas.
The Impact of the India-UK FTA on the Textile Sector
The FTA with the UK offers substantial benefits:
- Zero-Duty Access: Over 99% of Indian textile and apparel products can now enter the UK duty-free, eliminating previous import tariffs of 8–12%.
- Expanded Market Reach: This duty-free access grants Indian exporters a significant price advantage over competitors like China and Bangladesh.
- Export Growth Potential: With India currently holding a 6% share ($1.19 billion) of UK apparel imports (compared to China’s 25% and Bangladesh’s 20%), the FTA is projected to nearly double India’s overall textile exports to the UK to $3.2 billion by 2029.
Untapped Potential: FTAs with the USA and EU
Securing FTAs with the USA and EU is crucial for India to fully capitalize on global market opportunities.
India-USA FTA: Significant Scope
The US apparel market, valued at $83.6 billion, offers vast untapped potential. While India’s textile and apparel exports to the US currently stand at $8.1 billion (just ahead of Bangladesh’s $7.6 billion), there’s room for substantial growth.
- Strategic Advantage: High US tariffs on Chinese goods create a supply void that India is well-positioned to fill.
- Key Focus Areas for an FTA:
- Removing Non-Tariff Barriers (NTBs): Streamlining complex customs procedures and certifications.
- Promoting Man-Made Fibres (MMF): Encouraging production of MMF-based products, which dominate US imports.
- Simplifying Compliance: Making export processes easier for businesses.
India-EU FTA: A Strategic Imperative
The EU apparel market is the world’s largest, at $193.6 billion. While Bangladesh currently dominates EU imports ($28.3 billion) due to its Least Developed Country (LDC) duty-free status, this advantage will phase out by 2026. This creates a critical window for India to secure FTA-based duty-free access and ensure a level playing field.
- Key Focus Areas for an FTA:
- Addressing NTBs: Tackling non-tariff barriers related to EU green and labor standards, such as Environmental, Social, and Governance (ESG) norms and traceability requirements.
- Adapting to New Directives: Preparing for the upcoming Corporate Sustainability Due Diligence Directive (CSDDD).
- Encouraging Compliance: Supporting industry modernization and compliance through various schemes.
Current Status and Challenges of India’s Textile Sector
India’s textile sector is a cornerstone of its economy:
- Economic Contribution: It contributes 2.3% to India’s GDP, 13% to industrial production, and 12% of total exports.
- Growth Projections: The sector is projected to reach $350 billion by 2030.
- Global Standing: India is the 6th largest global exporter, sending goods to over 100 countries, with total exports reaching $34.4 billion. Apparel constitutes 42% of the export basket, followed by raw/semi-finished materials (34%) and finished non-apparel goods (30%).
- Employment: It’s the second-largest employer after agriculture, providing jobs for over 45 million workers.
Government Interventions and Needed Policy Reforms
The Indian government has initiated several programs to bolster the textile sector:
- PM MITRA Parks: Integrated textile parks designed to enhance infrastructure, reduce logistics costs, and consolidate the entire textile value chain.
- Kasturi Cotton Initiative: Aims to brand Indian cotton as a premium global product through quality certification, traceability, and standardized branding.
- National Technical Textiles Mission: Focuses on innovation, research, and skill development to boost competitiveness in the high-value technical textiles segment.