ANALYSIS FTA with EU could offer Indian textile exporters a $2-billion opportunity

European commissioner for trade and economic security Maroš Šefčovič with commerce minister Piyush Goyal

• India-EU FTA set to be signed, may remove tariffs on Indian textile exports
• Tariff removal could boost Indian textile exports to EU by $1.5–2 billion yearly
• EU is India's largest goods trading partner, with $75.85 billion exports in FY25

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Indian textile and apparel exporters may gain a long-awaited level playing field in the European Union as the India–EU Free Trade Agreement (FTA) nears finalisation.

The India-EU FTA is expected to be signed on January 27, with EU Commission president Ursula von der Leyen and European Council president António Costa  in Delhi as the chief guests at the Republic Day parade on January 26.

In FY25, India exported $7.6 billion worth of textiles and apparels to the EU but tariffs ranging from 6 to 20 percent have eroded competitiveness, putting Indian suppliers at a disadvantage against competitors such as Bangladesh, which enjoys zero-duty access under the EU’s Everything but Arms (EBA) scheme, and Vietnam that enjoys tariff-free entry through its FTA with the 27-nation bloc.

Elimination of these duties under the India–EU FTA could lower prices for European buyers, boosting demand.

Even a moderate drop in prices can raise Indian textile exports by roughly $1.5–2 billion a year. The estimate is based on applying the likely EU tariff cuts to India’s textile exports in FY25 and assuming that lower prices will boost demand by 15–25 percent, a standard method in trade analysis.

These gains will likely materialise only after the FTA is implemented, which could take at least a year after signing due to the EU’s lengthy ratification process.

In February 2025, India and the EU decided to ramp up talks for the proposed FTA, targeting to initially close it by the end of that year to tide over trade disruptions.

In FY25, India’s exports to the EU totalled $75.85 billion, while imports from the bloc reached $60.68 billion, making it the South Asian nation's largest trading partner for goods.

Being negotiated for over a decade, the India-EU trade deal has 24 chapters across goods and services.

Better market access to the EU would be crucial given that Indian textile exports to the US are facing challenges due to steeper tariffs of 50 percent, compared with duties of around 20 percent for Bangladesh and Vietnam.

The US is the single-largest market for India’s textile and apparel exports, accounting for nearly 28 percent of the export revenue from the sector.

India’s exports of textile and apparel products to the US were valued at nearly $11 billion in FY25.

In FY25, India exported textile and apparel, including handicrafts, worth $37.7 billion, accounting for roughly 8.6 percent of the country’s outbound shipments.