THE RFKN INDIA-EU FTA SERIES

Among the many sectors covered by the India–European Union Free Trade Agreement (FTA), textiles and apparel stand out for a simple reason: tariffs, more than any other factor, have long shaped how this trade flowed. The FTA removes most of those tariffs. The consequences are likely to be felt on both sides of the supply chain, by Indian manufacturers and by European brands, retailers, and importers who depend on global sourcing.

Relevant Laws

1. Customs Act, 1962
2. Customs Rules, 1963
3. Customs Tariff Act, 1975
4. Foreign Trade Policy (FTP) 2023:
5. Key Tool: ITC (HS) Schedule 1 (Import Policy).
6. Foreign Exchange Management Act (FEMA), 1999
7. FEMA (Current Account Transactions) Rules,
8. Bureau of Indian Standards (BIS) Act, 2016:
9. Textiles Committee Act, 1963
10. Environment (Protection) Act, 1986
11. Consumer Protection Act, 2019
12. Central Goods and Services Tax (CGST) & Integrated GST (IGST) Acts, 2017
13. Production Linked Incentive (PLI) Scheme for Textiles

Benefits For Indian Companies

Until now, Indian textile and apparel exports entering the EU faced import duties of up to 12%. In a sector where margins are narrow and price comparisons across countries are routine, this was a disadvantage. Even when Indian factories were competitive on cost and quality, European buyers often preferred sourcing from Bangladesh, Vietnam, or Pakistan, which enjoyed duty-free or preferential access to the EU market. The FTA removes this structural barrier. Indian textile and clothing exports will now enter the EU at zero duty across almost all tariff lines. For Indian companies, it is the removal of a long-standing handicap.

The scale of the opportunity is big when placed against the size of the market. The EU imports over $250 billion worth of textiles and apparel annually. India’s current textile exports to the EU are estimated at around $7–8 billion—a modest share that reflects past tariff constraints. Even a small increase in market share in such a large market translates into significant export growth. For Indian exporters, the most immediate effect is price competitiveness. When a European retailer now compares quotations from India, Bangladesh, and Vietnam, the Indian bid will no longer carry an embedded 10–12 per cent cost penalty. This is particularly significant for ready-made garments, home textiles, cotton products, and man-made fibre textiles, segments where India already has scale and expertise.

The likely impact will be felt strongly in India’s established textile clusters such as Tiruppur, Surat, Ludhiana, and Panipat, many of which are dominated by small and medium enterprises. Increased orders from European buyers can translate into higher production volumes, new investments, and employment expansion in a sector that already employs around 45 million people.

The FTA also creates an incentive for Indian firms to move into higher-value segments. European markets place increasing emphasis on sustainability, traceability, and compliance with environmental and labour standards. With tariff barriers removed, the commercial returns from meeting these standards become greater. Indian exporters have a reason to invest in certifications, cleaner production processes, and premium product lines that were previously less attractive due to tariff-related price pressures.

Equally important is what the agreement corrects. For years, Indian exporters argued that they were losing orders not because of inefficiency but because competitors had preferential access. The FTA effectively removes that argument. Indian firms now compete in Europe on the basis of quality, reliability, and compliance alone.

Benefits For European Companies

But the benefits do not stop with Indian manufacturers. From a European perspective, the FTA reshapes sourcing economics.

European fashion brands, home furnishing retailers, and textile importers have long sourced from India, but often in smaller volumes than India’s capacity. The reason was simple: tariffs increased the landed cost of Indian goods. With those duties removed, India becomes a far more competitive sourcing base.

The most direct benefit for European importers is cost. A garment or bedsheet sourced from India will now be cheaper to import into the EU than before. This reduction can improve margins for retailers or allow more competitive pricing for consumers. In price-sensitive product categories such as home textiles and basic apparel, even a single-digit cost change affects sourcing decisions.

The agreement also helps European companies diversify supply chains. In recent years, over-reliance on a small number of sourcing countries has exposed vulnerabilities. Bangladesh and Vietnam have been important alternatives to China, but concentration in any limited geography carries risks. With tariff-free access now assured, India becomes a stronger third pillar in Europe’s sourcing strategy. This diversification is not only about risk. If an Indian manufacturer offers better quality, scale, or compliance, buyers no longer have to offset those advantages against a duty disadvantage.

European retailers of home textiles stand to benefit in particular. India is already a major global supplier of towels, bed linen, curtains, and upholstery fabrics. These products are bulky and price-sensitive, and tariff removal makes Indian supplies more attractive for large European chains.

There are also upstream benefits for European textile and machinery companies. As Indian exports to Europe grow, Indian manufacturers are likely to invest in better technology, specialised fabrics, advanced dyes, and finishing processes. European firms that supply textile machinery, chemicals, and technical inputs can find new commercial opportunities in this upgrading process.

The FTA also simplifies trade procedures. Clearer rules of origin, improved customs cooperation, and greater regulatory predictability reduce transaction costs for importers. For small and medium European importers in particular, simpler compliance requirements lower the barrier to sourcing from India.

The Importance of Understanding the Law

However, to make use of the FTA, it is imperative to understand the law and be mindful of these three (among other) considerations.

Companies that qualify for zero-duty benefits by interpreting rules of origin and restructuring supply chains must ensure that legal compliance. In textiles, where yarn, fabric, and stitching may occur across borders, legal advice is essential to ensure products genuinely meet FTA criteria and avoid denial of preferential treatment at EU ports.

EU regulatory standards on chemicals, labelling, sustainability, and labour practices are stringent. Companies must take legal advice to ensure that they can assist Indian exporters in meeting these requirements and also conduct due diligence. Designing and completing documentation and certification that withstand customs scrutiny and prevent retrospective duties, penalties, or shipment delays would also be important.

As sourcing from India expands, new contracts, joint ventures, and logistics arrangements will follow. It will be crucial that draft agreements reflecting FTA obligations, advise on customs procedures and tariff classifications, and resolve disputes over origin, compliance, or rejected consignments must be supervised by legal professionals, to ensure minimisation of liability and prevent the escalation into costly commercial or governmental disputes.

In practical terms, the FTA removes a distortion that affected both sides. Indian manufacturers gain access to one of the world’s largest consumer markets without tariff barriers. European companies gain access to a competitive, diversified, and increasingly compliant textile ecosystem without incurring additional import costs.