• Indian textile exports to the United Kingdom are projected to double within five to six years following the implementation of a new free trade agreement (FTA).
• The FTA, signed on May 6, 2025, eliminates tariffs on 99% of Indian products, including textiles, providing India with zero-duty access to the UK market by 2026.
• India is expected to invest in expanding garmenting capacities to meet the growing demand, and UK retail giants are likely to increase sourcing from India due to the competitive advantage.

Indian rating agency ICRA forecasts the export volumes of Indian textiles to the United Kingdom to double within a period of five to six years following implementation of the new tariffs, resulting in incremental capacities being added within the next four to five years to fulfill orders.

India and the UK recently finished trade negotiations, and a free trade deal (FTA) was signed after negotiations spanning three years. Though the general terms have been finalized, the FTA is likely to be in place in 2026 after going through legal scrutiny.

At present, an 8-12 per cent tariff is charged by the United Kingdom on Indian apparel and home textiles. Tariffs have been removed in the FTA on 99 per cent of Indian products, including textiles.

The FTA conclusion would be likely to instill investments in the apparel and home textile industry, besides creating employment opportunities and improved earnings for the exporters with varying product mix, ICRA said.

Though the United Kingdom's proportion of India's exports of apparel and home textiles had been constant at 7-8 per cent in the last five years during flattish growth, the latter is to surpass 11-12 per cent by the year 2027 based on an 11-per cent compounded annual growth rate (CAGR) between 2024 and 2027.

China was the largest apparel and home textile exporter to the United Kingdom in 2024 with almost 25 per cent market share, followed by Bangladesh (22 percent), Turkey (8 percent) and Pakistan (6.8 percent).

Once the FTA is implemented, with zero-duty access on home textiles and apparel exported, India would enjoy a level playing field with respect to the current duty-free access country status like Pakistan, Vietnam and Bangladesh, ICRA said in a research report.

During 2024 and the initial two months of 2025, Indian apparel and home textiles exports to the United Kingdom saw 6 per cent and 7 percent year-on-year (YoY) growth respectively.

To address the incremental demand, the Indian textile sector itself is also likely to invest in incremental capacities in garmenting segment. On the value chain's other side, i.e., spinning, fabric processing, etc., the outlay is likely to be relatively lower due to the country's inherent over-capacity situation, ICRA added.

Indian clothing exporters' competitiveness would increase significantly with the removal of import levies by the United Kingdom. Exports from current manufacturing bases such as Tiruppur, Surat, Delhi National Capital Region are expected to enhance.

UK retail giants will most likely increase their sourcing from India for value-for-money production and varied product range enabled by the FTA. Indian suppliers increasing their revenues and improving their image in the global apparel business will be the beneficiary of this trend, ICRA further added.