The prospect of the India-European Union Free Trade Agreement (FTA) nearing completion is indeed being called a ‘game-changer’ by industry bodies like CTA Apparels.
The most significant benefit of the FTA is the expected elimination of the import duties currently imposed by the EU on Indian textile and apparel goods. Indian apparel exports to the EU currently face a standard EU tariff that averages around 9.6 per cent. However, once the FTA is implemented, these tariffs would be scrapped or phased out. This immediately makes Indian products 9.6 per cent more competitive on price compared to rivals who do not have an FTA with the EU.
The tariff elimination directly addresses the competitive disadvantage India faces compared to its top rivals like Vietnam and Bangladesh in the EU market.
These major competitors already benefit from preferential access. Bangladesh, as a Least Developed Country (LDC), enjoys zero-duty access under the EU's Everything But Arms (EBA) scheme. Vietnam also has a functioning FTA with the EU.
The FTA will put India on a similar footing with Vietnam and significantly reduce the price gap with Bangladesh, allowing India to increase its market share.
The EU is already India's second-largest export destination for textiles and apparel. The removal of duties is projected to lead to substantial growth. Industry experts project that the FTA could lead to 20 per cent to 30 per cent growth in apparel exports to the EU within the first two years of implementation.
The FTA is also essential for India’s market share in EU’s T&A imports which currently stands at 5 per cent.
The increased demand and market assurance provided by the FTA will likely attract major investment in the Indian textile and apparel sector, particularly in the Man-Made Fibre (MMF) segment and Technical Textiles, which are high-value areas.
India's geographical proximity compared to some Far East competitors, combined with stable supply chains, will appeal to EU buyers seeking faster delivery and a 'China plus one' sourcing strategy.
