How it levels the playing field for the textile and apparel industry

For many industry insiders who have been involved in global supply chains for years, the formal signing of the India-EU Free Trade Agreement (FTA) on January 27, 2026 marks the beginning of a new era. For decades, Indian exporters felt disadvantaged: They faced high tariffs, while neighboring countries such as Bangladesh and Vietnam enjoyed preferential access to important markets such as the European Union. This commentary examines the key changes this agreement will bring to the textile and apparel landscape in India and the EU.

Leveling the global playing field

For the first time in almost 20 years, the “customs wall” that separated Indian crafts from European retail spaces has fallen. Previously, Indian garments were subject to import duties of between 4 and 12 percent. For ready-made garments (RMG) they were 9.6 to 12 percent; Cotton fabrics were taxed at 4 to 10 percent and synthetic fibers (MMF) at 12 percent. Home textiles such as linen and towels were subject to tariffs of 6 to 12 percent and technical textiles of 8 to 12 percent.

Ultimately, it’s not just about price, but about equality. “Duty-free access for Indian apparel to the EU market will decisively turn the tide in India’s favor and improve our competitiveness in the European market,” comments A. Sakthivel, according to The Secretariat. He is the Chairman of the Apparel Export Promotion Council (AEPC), sponsored by the Ministry of Textiles, India.

Beyond the finished garment, the FTA impacts the entire farm to fashion value chain. Yarn and fabric exporters who previously faced adverse tariffs now see a clear path to market. The Indian Cotton Textiles Export Promotion Council (Texprocil) has long sought this duty-free access. Such an agreement would “restore competitiveness, strengthen value chains linked to farmers and significantly increase India’s presence in the EU market,” he is quoted as saying in The Hindu.

Although India has always been a major cotton power, the FTA is encouraging a shift towards high-quality synthetic fibers and technical textiles. The removal of the 12 percent duty on clothing made from synthetic fibers will enable Indian designers to compete in the performance and activewear segments. Sammir Dattani, managing director of yarn maker Sanathan Textiles, told Textile Excellence that the deal serves as a “strategic turning point.” It directly increases cost competitiveness in various end-use segments, including automotive and technical materials.

At the right time: restoring export momentum

The Indian apparel and textile industry is optimistic and is backed by aggressive growth forecasts. The EU is India’s second largest export market after the USA. Therefore, the reduction of trade barriers is expected to multiply the volume of orders. Industry leaders are already predicting deliveries will double. “This agreement will provide a significant boost to garment exports, which are expected to double in the next three years,” Sakthivel said, according to Economic Times.

The timing of this FTA is critical, especially given the 50 percent tariffs recently imposed on the U.S. market. By securing the European corridor, Indian manufacturers are diversifying their risk. “Duty-free access presents a significant opportunity, especially given the challenges we face in the US,” confirmed Sivaramakrishnan Ganapathi, according to The Economic Times. He is the Managing Director of Gokaldas Exports, a global apparel manufacturer and exporter based in Bengaluru. He added that while Europe would not completely replace the US, it would provide “timely relief.”

Strengthening small and medium-sized businesses

But it’s not just the big players who will benefit. The heart of India’s textile and apparel industry beats in clusters like Tiruppur, Bengaluru and Noida. There, millions of livelihoods depend on strong exports. The FTA is intended to be a lifeline for these micro, small and medium enterprises (MSMEs). According to the Government Press Information Bureau (PIB), the agreement will “promote production, capacity utilization and employment in labor-intensive MSME clusters.” This ensures that the benefits of global trade reach the 45 million people directly employed in the sector.

European buyers are among the most demanding in the world when it comes to environmental, social and governance (ESG) standards. Instead of seeing this as a hurdle, Indian industry insiders see the FTA as recognition for their “green” investments. “The FTA will reward these efforts by opening more markets and strengthening long-term buyer relationships across Europe,” explains KM Subramanian, according to Fibre2Fashion. He is president of the Tiruppur Exporters’ Association (TEA) and particularly mentioned the region’s leading role in zero liquid discharge and solar energy.

Better planning of procurement

For European brands and retailers, the FTA is not just about lower costs, but also about stability. By integrating Indian suppliers into a formal contractual framework, the “Sourcing from India” model becomes more predictable. An article in the Global Textile Times suggests that the agreement “improves regulatory cooperation, customs procedures and long-term market access.” This makes it easier for European retailers to move away from fast fashion and towards more stable, long-term supply partnerships.

The trade agreement is a two-sided affair. It benefits the European engineering sector as well as the Indian garment sector. To meet increasing demand and the EU’s strict quality standards, Indian factories need to modernize. Industry insiders therefore expect a sharp increase in imports of high-quality European textile machinery. This creates a circular economy in which Indian manufacturers use European technology to produce clothing that is then sold back to European consumers.

The way forward: implementation and opportunities

Even though the ink of the signatures on the agreement is already dry, the real work of implementation now begins. According to Rutger Bonsel, Managing Director of Broekman Logistics India and the India-Netherlands Business Association, the impact of the FTA on logistics and supply chains will be felt. It will be seen “how supply chains are redesigned, how quickly goods cross borders and how confident companies are in investing in cross-border operations”.

The logistics and supply chain expert warns in his LinkedIn post that “tariff relief alone does not guarantee competitiveness.” For him, logistics performance becomes the decisive factor. Companies should ask themselves three crucial questions: Can lead times be shortened? Can inventory be positioned closer to demand? Can the total supply chain costs be optimized, not just the customs component?

Another area is customs clearance and rules of origin (RoO). This is, according to Bonsel, “one of the most underrated achievements of the agreement.” “Faster, more predictable border processes can shorten the time and reduce local inventory needed to serve your market and enable time-sensitive flows such as spare parts, healthcare products, electronics and fashion,” he said. The industry must now focus on navigating the rules of origin and ensuring that every factory in the supply chain meets the EU’s evolving traceability requirements.

Rethinking global supply chains

Bonsel also emphasizes the opportunity that the FTA offers beyond the pure movement of goods, namely in services, temporary mobility and digital trade. “By improving market access for services and creating a more predictable digital trading environment, the FTA supports integrated end-to-end supply chain models rather than fragmented handoffs between parties,” he notes.

Finally, the supply chain expert warns against seeing this FTA “just as a sourcing alternative for India” or simply as a “new market with 1.4 billion consumers”. Since many of these potential customers are not (yet) ready to move up, “the newly developed market for Mahindra & Mahindra & Tata Motors is currently actually larger than the new market for Volkswagen & Renault!” Bonsel believes that if implemented correctly, the greatest potential lies in “India becoming a strategic hub in the European and global value chains”.