Font size:
Print
India-UK Free Trade Agreement: A Transformative Leap for India’s Textile Sector and Global Trade Integration
India-UK Free Trade Agreement: A Game-Changing Opportunity for India’s Textile Sector and Trade
Context: Recently, India and the UK concluded a landmark Free Trade Agreement (FTA), described by PM Narendra Modi as a “historic milestone”.
More on News
- The FTA comes at a time of global protectionism and tariff hikes (e.g., by the US), underscoring India and the UK’s commitment to openness and multilateralism.
Current Status of India-UK Trade
- India-UK trade in 2024: $23.3 billion.
- UK exports to India: $8.06 billion (pearls, spirits, nuclear reactors, vehicles).
- India’s exports to UK: machinery, apparel, mineral fuels, pharmaceuticals, footwear.
- India is the 12th largest goods supplier to the UK, holding just a 1.8% share in the UK’s import basket.
- The FTA aims to raise bilateral trade to $120 billion by 2030.
- This is the most comprehensive trade pact signed by the UK post-Brexit and offers mutual benefits across trade, investment, and job creation.
Salient Features of the FTA
- Tariff Reduction Commitments
- India to cut duties on 90% of tariff lines.
- UK to provide duty-free access to 99% of Indian exports.
- Industrial goods: Zero-duty access for Indian exports.
- Key tariff cuts:
- Whisky and gin: From 150% to 75%, and eventually to 40% over 10 years.
- British cars: Tariffs down from 100% to 10%.
- Footwear and auto components: Tariff reduction of 7–8%.
- Woven and knitted apparel: Tariffs reduced by 9%.
- Marine, chemical, and food products: Tariff cuts ranging from 4% to 10%.
- Market Access & Non-Tariff Benefits
- Agreement includes regulatory alignment, intellectual property, investments, and mobility of professionals.
- The UK will issue ~100 additional work visas annually for Indian professionals in specified sectors.
- Agreement on consultation over carbon border taxes impacting steel and aluminium.
Impact of the FTA: Boost to India’s Textile & Apparel (T&A) Sector
- Current Status and Potential
-
- The UK imports $26.9 billion in T&A, with apparel alone at $19.6 billion.
- India’s share is just 6% ($1.19 billion), compared to:
- China: 25%
- Bangladesh: 20%
- With zero-tariff access, India can gain competitive advantage.
-
- Projected Export Gains by 2027
-
- Woven apparel: $753M → $1.6B
- Knitted garments & home furnishings: Substantial increase.
- Made-ups (bed linen, curtains): $276M → $477M
- Carpets: $102M → $185M
- Footwear: $279M → $545M
- Auto components: $286M → $572M
- Marine products: $107M → $185M
- Organic chemicals: $420M → $966M
Strategic and Geopolitical Implications
- Diversification Strategy for the UK:
- Reduces UK’s dependence on EU and China.
- Aligns with the UK’s “Global Britain” post-Brexit strategy.
- Strategic Autonomy for India:
- Complements “Make in India”, “Act East”, and non-participation in RCEP.
- Strengthens India’s case in equitable trade partnerships with like-minded economies.
Key Challenges to the FTA : Structural Challenges in the Textile & Apparel (T&A) Sector
- Fragmented Manufacturing Base: Dominated by MSMEs working in isolated silos across different states.
- Disjointed Value Chain
- Cotton: Gujarat & Maharashtra
- Yarn: Tamil Nadu
- Fabric Processing: Scattered
- Garment Stitching: Spread across states
- Leads to high logistics costs and delays.
- Order-to-delivery time: 63 days (India) vs 50 days (Bangladesh).
- Manmade Fibre (MMF) Policy Bottlenecks
- Inverted GST structure: Fibre taxed higher than final product.
- Restrictive quality norms hamper MMF exports.
- Misalignment with global demand for MMF-based textiles (e.g., activewear, athleisure).
Way Forward: A Three-Pronged Strategy
- Policy-Level Interventions
- Operationalise PM MITRA Parks: Focus on integrated, export-oriented textile parks in Navsari (Gujarat) and Virudhunagar (Tamil Nadu).
- Rationalise GST on MMF Sector: Address inverted duty structure to boost MMF competitiveness.
- Simplify Export Processes: Reduce compliance burdens on exporters for ease of doing business.
- Expand Trade Negotiations to EU and US
- EU apparel imports: $193.6 billion
- India lags due to lack of duty-free access (Bangladesh, Vietnam enjoy it).
- US market: $83.6 billion
- China’s share is declining (22%) due to high reciprocal tariffs — India must step in.
- EU apparel imports: $193.6 billion
- Practice-Level Changes
- Match Global Fashion Aesthetics: Invest in design, trends, and seasonal collections aligned with UK/Western consumer demand.
- Ensure ESG and Compliance Standards
- Align with the EU’s CSDDD by 2029.
- Build traceable, sustainable supply chains.
- Implement green audits and certifications.
- Product-Level Innovations
- Move Towards High-Value Products: Focus on activewear, athleisure, and technical textiles.
- Invest in Functional & Performance Fabrics: Develop MMF capabilities to integrate into global retail supply chains.
