EU pact seen as a shot in the arm for US-tariff hit apparel exporters

Mumbai: India’s free trade agreement (FTA) with the European Union (EU)—set to eliminate duties for labour-intensive sectors such as textiles and apparel—comes as a much-needed relief for Indian garment exporters battered by the US’s punishing tariffs imposed last year. The deal offers exporters a rare opportunity to regain lost ground in a key global market even as they remain financially strained.

India and the EU on Tuesday announced conclusion of negotiations over an FTA that would see the EU drop tariffs on 99.5% of items India exports to the region.

The EU is a key market, accounting for a fifth of India’s $36.7 billion annual textile and apparel exports, per government estimates. Removal of the current 9-12% tariffs by the bloc across product categories would put India on an equal footing with its two largest competitors in the apparel export market—Bangladesh and Vietnam—both of which already enjoy duty-free access to Europe.

Bangladesh exports textiles and apparels worth over $30 billion a year to Europe, given its classification as a least developed country, which gives it zero duty access, Piyush Goyal, minister for commerce and trade, said at a press briefing on Tuesday.

"Now, we see before our eyes a potential to grow from $7 billion to at least $30-40 billion very quickly in the textile sector alone,” Goyal said. This will have a “tremendous potential” for job creation in India, he said.

The benefits from the FTA would accrue from the day it comes into force, which the minister said should happen before the end of 2026.

A surge in exports to the EU would help Indian garment manufacturers offset the impact of the 50% tariffs levied by the US, which is the country's largest apparel export destination.

“In this market condition, the India-EU FTA has created an avenue for growth. All European customers have been waiting for this for many years,” said Narendra Goenka, former chairman of Apparel Export Promotion Council (AEPC).

Tiruppur Exporters Association, the apex body representing knitwear exporters in Tiruppur in Tamil Nadu, has said the FTA will help India achieve its vision of taking annual textile exports to $40 billion by 2030 from $13 billion now. Exports from Tiruppur exceeded ₹44,000 crore in FY25.

“This agreement marks a structural inflection point for India’s apparel exports,” said Prabhu Dhamodharan, convenor of Coimbatore-based Indian Texpreneurs Federation (ITF).

The textiles segment comprises raw materials such as fibers, yarns, and fabrics used to make apparels or finished clothing.

Over the past five years, India’s exports to the EU have grown steadily in high-technology sectors, while labour-intensive segments such as apparel remained subdued due to competition from Bangladesh and Vietnam.

“The FTA can reset this imbalance and unlock growth in labour-intensive exports, especially apparel,” Damodharan said.