Preferential Patterns: Are FTAs Helping or Hurting India’s Textile Industry

Ms. Mamatha G P K, Associate Professor, Pearl Academy

The textile industry in India is one of the top 3 employment-generating industries. The apparel industry is ever-growing. With the ongoing US-China trade war, India has perceived this as a blessing in disguise and is preparing itself for the economic boom. With visions like Viksit Bharat, Make in India, and global collaborations taking place every passing day, our textile industry is at the most advantageous place. However, navigating the complexity of a VUCA (Volatile, Uncertain, Complex, and Ambiguous) environment, the fashion and textile sector has seen notable change over the past five years. With an eye toward India's Viksit Bharat, this study investigates important issues, real-time data, and worldwide trends influencing the field. Emphasising sustainable practices, technical developments, and policy interventions to create resilient and creative ecosystems, it offers a solution-oriented framework to handle these dynamics. Free trade agreements are a double-edged sword for India’s textile industry—offering great potential for growth in global markets while also demanding structural upgrades and competitiveness. If negotiated and implemented with strategic foresight, FTAs can help Indian textiles reclaim their global dominance in both traditional and technical textile sectors.

Export Trends & FTA Influence (FY 2020–25)

*FY denotes Apr–Mar; calendar data referred where mentioned.

FTA Highlights & Their Impact on Textiles

India–UK FTA (May 2025)

Zero import duties on 99% of Indian textile/apparel items, replacing 8–12% tariff (AP News).
UK textiles imports: China 25%, Bangladesh 22%, India ($1.2 bn) (The Financial Express).
Forecast: UK exports to double to ~$3-3.2 bn by 2029 (11–13% CAGR).
MSMEs empowered by fintech, enabling $1.1-1.2 bn textile export opportunity (Indian Textile Journal).

India–EFTA TEPA (Mar 2024)

Duty-free access to 99.6% of exports; tariffs abolished even in Switzerland, benefitting textile makers (Fibre2Fashion).
Offers new opportunities in Norway/Switzerland; potential to enlarge existing exports by 34% in segments like cotton T-shirts (Fibre2Fashion).

EU Relations

EU imports ~$6-8 bn of Indian textiles, ~9–12% tariffs currently.
Competing nations (Bangladesh/Vietnam) enjoy duty-free GSP. An FTA with the EU is critical for parity (textilevaluechain.tempurl.host).

US Context

US imports textiles ~$83.6 bn; India’s share ~$8.1 bn vs Bangladesh $7.6 bn .
US–India FTA under discussion; removing tariffs & NTBs could help India fill supply gaps post-China tariffs.

Challenges amid FTA Expansion

Fragmented Value Chain
- Cotton grown in one state, yarn spun elsewhere—it extends lead times (63 days vs Bangladesh’s 50) (The Financial Express).
Use of FTA by Rivals
- Cheaper Chinese fabrics routed via Bangladesh under SAFTA hurt the domestic spinner segment (Drishti IAS).
Policy Gaps in the MMF Segment
- MMF textiles taxed higher than finished goods due to inverted GST et al., making them less competitive (The Financial Express).
Trade Deficits with FTA Partners
- Utilisation rate of FTAs by Indian exporters is ~25%, vs 70–80% for others; trade deficits with ASEAN/Korea widened (Drishti IAS).
ESG & Compliance Barriers
- EU’s CSDDD due in 2029: Indian exporters need eco-labelling, traceability, audits (The Financial Express).

Strategic Recommendations

1. Phase-in Integrated Hubs

Operationalise PM–MITRA parks in Navsari, Virudhunagar to consolidate spinning, weaving, finishing for economies of scale (The Financial Express).

2. Map Priority FTAs

Push EU/US FTAs with textile-friendly terms. Focus on removing tariffs and NTBs like certifications and customs complexity.

3. Tax Reform for MMF

Rationalise GST: tax inputs at par with outputs to improve competitiveness in high-value fabrics.

4. Support Cluster MSMEs

Provide capex financing, technology support, and fintech trade finance solutions to MSMEs for scale and integration (Indian Textile Journal).

5. Accelerate ESG Compliance

Offer incentives/grants for ESG audits and traceability tech to meet EU/UK standards under upcoming compliance regimes.

6. Mitigate Dumping via Strict Rules of Origin

Strengthen customs enforcement, penalties and verification to prevent hub-and-spoke misuse (Chinese inputs in Bangladesh, etc.).

Final Outlook

FTAs have begun to reshape India’s textile trajectory—exports grew from $36 bn to $42 bn over five years. The India–UK FTA alone is expected to double UK-bound exports within five years. But to maintain and accelerate gains, India must complement these trade deals with structural reforms—integrated manufacturing hubs, GST rationalisation in MMF, wider FTA coverage, MSME financing, and ESG-ready supply chains. Only then can India compete head-to-head with Bangladesh, Vietnam, and China in the global textile arena. The thread of FTAs must be woven with national reforms to truly elevate India’s textile industry.