UK FTA could be a $1 opportunity for Indian textile industry
The FTA should beneficial more to Indian exporters than UK suppliers, supporting export expansion without materially impacting domestic manufacturers: Ind-Ra
The UK-India Free Trade Agreement (FTA) offers a strong medium-to-long-term growth opportunity for India’s textile industry, potentially opening almost $1 billion in incremental export opportunities.
This will enhance export competitiveness and market share in UK. However, the extent of the benefits will depend on how effectively textile companies expand capacity, manage costs, meet compliance requirements, and maintain financial discipline, a report by India Ratings and Research (Ind-Ra) said.
Ind-Ra views the FTA as credit positive for textile exporters. While the agreement enhances export opportunities, the benefits will accrue gradually and depend on factors such as capacity expansion, buyer approvals, working capital management, and regulatory compliance.
“Large, integrated textile companies are better positioned to capitalise on these opportunities due to their scale, established customer relationships, and stronger financial resources. In contrast, small players may face challenges if expansion is funded through excessive debt, which could pressure leverage and liquidity,” Rohit Sadaka, Director–Corporate Ratings at Ind-Ra said.
The UK is India’s third-largest textile export destination, accounting for nearly 6.1 per cent of India’s total textile exports. At the same time, imports of UK-origin textile products into India remain negligible, representing less than 1 per cent of domestic consumption. India’s share of the UK textile import market is only about 6.9 per cent, indicating significant headroom for growth. As a result, the FTA should benefit Indian exporters more than UK suppliers, supporting export expansion without materially impacting domestic manufacturers.
Rise in apparels market share
One of the most attractive aspects of the agreement is the opportunity to increase market share in apparel and home textiles. The removal of the previous 12 per cent tariff disadvantage significantly improves the landed cost competitiveness of Indian products in the UK market. This could help Indian exporters gain share from Chinese suppliers over time.
However, competing with Bangladesh may prove more challenging due to Bangladesh’s scale advantages and lower production costs. Even a 3 per cent increase in India’s share of the UK textile import market from the current level of around 6.9 per cent to around 10 per cent could translate into an incremental export opportunity of about $900 million for Indian players.
Although the FTA enhances competitiveness, profitability gains are unlikely to be immediate. UK buyers may negotiate lower prices and absorb part of the tariff benefits, limiting near-term margin expansion. Over time, higher export volumes can improve operating leverage and support profitability. However, elevated fuel, power, freight, and shipping costs may offset some of these gains in the short term.
Regulatory compliance and sustainability standards will become increasingly important determinants of success. Exporters must adapt to evolving environmental regulations, ESG reporting requirements, traceability expectations, ethical sourcing standards, and product quality norms.
Companies already aligned with such requirements, including Carbon Border Adjustment Mechanism-related standards, will have a competitive advantage. Small exporters may face higher compliance costs as these requirements become more stringent, it added.
UK FTA: Explainer by News Associate
The India–United Kingdom Comprehensive Economic and Trade Agreement (CETA) was formally signed on July 24, 2025, and officially came into force on July 15, 2026. The landmark deal grants duty-free or significantly reduced tariff access across vast majority of goods traded between both the nations.
Labour-intensive manufacturing sectors are the primary beneficiaries, receiving zero-duty access for textiles, ready-made garments, footwear, leather goods, processed foods, and agricultural produce (cereals, fruits, and spices). Additionally, IT, business services, ceramics, and engineering exports stand to gain substantially.
The UK automotive industry gains unprecedented access with phased tariff reductions on vehicles (slashed from over 100 per cent to 10 per cent). Premium spirits and scotch whisky also benefit from steep tariff reductions (dropping initially to 75 per cent from 150 per cent). Furthermore, UK providers of financial, professional, and digital services—along with firms bidding on Indian government procurement contracts in green energy and infrastructure—are positioned for significant growth.
