Union Budget 2026 Focuses on Turning FTAs into Export Growth for Textiles

India’s textile and apparel exports, valued at approximately USD 34–35 billion annually, have secured preferential access to several key global markets through Free Trade Agreements (FTAs) with regions including the UAE, Australia, EFTA countries, and ASEAN-linked economies. As these agreements move from negotiation to implementation, the industry’s focus is shifting toward effective utilisation—converting tariff advantages into higher order volumes, improved realisations, and long-term buyer relationships.

With the India–EFTA Trade and Economic Partnership Agreement (TEPA) now operational and aligned with investment-led manufacturing expansion, the Union Budget 2026–27 presents a timely opportunity to strengthen execution frameworks that translate FTA access into measurable export outcomes. At the same time, progress on the proposed India–EU FTA remains a key expectation, given its potential to significantly improve India’s competitiveness in one of the world’s largest apparel markets, particularly against sourcing hubs such as Vietnam and Bangladesh.

From Market Access to Market Share

Why FTA Utilisation Remains Limited

Despite strong global demand, utilisation of FTAs in the textile and apparel sector remains constrained by operational and structural challenges. These include complex Rules of Origin (RoO), especially across yarn, fabric, and trims; fragmented domestic value chains that limit large-scale RoO compliance; and rising costs related to testing, certification, traceability, and ESG requirements.

In addition, exporters face working capital pressures during buyer onboarding and initial order cycles. Competing sourcing destinations demonstrate that strong backward integration combined with efficient trade facilitation is critical for converting tariff benefits into sustained export growth.

Policy Priorities for Union Budget 2026–27

1. FTA Execution and Trade Facilitation

Simplification and digitisation of Rules of Origin compliance
Faster issuance and verification of Certificates of Origin
Sector-specific execution playbooks for textile and apparel exporters

2. Strengthening Domestic Value Chains

Incentives for RoO-compliant yarn, fabric, and processing capacities
Targeted support for man-made fibre (MMF) and value-added textiles
Reduced dependence on non-FTA inputs that limit eligibility

3. Compliance and Sustainability Enablement

Shared infrastructure for testing, traceability, and ESG readiness
Budgetary support for compliance upgrades aligned with evolving global regulations

4. Export Finance and Liquidity Support

Improved access to pre- and post-shipment credit for FTA-linked exports
Faster settlement of RoDTEP and ROSCTL incentives
Working capital support for buyer onboarding and capacity scale-up

5. Market Activation and Buyer Engagement

Targeted buyer outreach in FTA partner markets and EU-readiness initiatives
Support for trade fairs, sourcing forums, and B2B platforms
Cluster-based initiatives to improve lead times and speed-to-market

Industry Perspective

Dr. Mukesh Kansal, Chairman, CTA Apparels, said:

“Union Budget 2026–27 represents a critical opportunity to convert India’s FTAs into tangible export gains for the textile and apparel sector. Preferential access alone does not ensure outcomes; effective execution is essential. Low FTA utilisation is largely linked to complex Rules of Origin, high compliance costs, and supply-chain gaps. Policy support focused on simplified RoO processes, stronger domestic value-chain integration, shared compliance infrastructure, and accessible export finance can significantly improve outcomes. With sustained momentum toward the India–EU FTA, FTAs can support higher exports, improved value realisation, and long-term global competitiveness for the sector.”