Trade Deal With UK May See Around $1 Billion Incremental Exports
The removal of the previous 12% tariff disadvantage in apparel and home textiles significantly improves the landed cost competitiveness of Indian products in the UK market.
Chennai: The UK-India Free Trade Agreement (FTA) can potentially open up an almost $1 billion incremental export opportunity for Indian textiles.
The trade deal offers a strong medium-to-long-term growth opportunity for India's textile industry, potentially opening up almost $1 billion in incremental export opportunities, finds India Ratings and Research. In FY26, India exported USD 2.2 billion in textiles and readymade garments to the UK.
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 around $900 million for Indian players.
While the deal that lowers tariffs, will enhance export competitiveness, the extent of the benefits will depend on how effectively textile companies expand capacity, manage costs, meet compliance requirements, and maintain financial discipline.
“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”, said Rohit Sadaka, Director, Corporate Ratings, Ind-Ra.
The UK is India's third-largest textile export destination, accounting for nearly 6.1 per cent of India's total textile exports. 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.
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 (CBAM)-related standards, will have a competitive advantage. Small exporters may face higher compliance costs as these requirements become more stringent.
