India-UK trade deal: Can the $174-billion textile sector deliver?

India and the UK signed the Comprehensive Economic and Trade Agreement (CETA) on July 24, which is expected to revitalise India’s textile sector by providing a much-needed level playing field with competitors such as Bangladesh, Vietnam and Pakistan. The trade deal removes the tariff on textile imports from India, enhancing competitiveness for a sector that is the second-largest employment generator in the country.Prior to the CETA, India faced a duty disadvantage of 10-12%, which posed challenges for exporters in sustaining their order books. It reduced their profit margins and compelled them to vie for space in a highly competitive global market.

The statistics on textile exports reveal this lopsided dynamic further. According to data, the total textile imports of the UK reached $27 billion in 2024, significantly lower than India’s total textile exports of $36.71 billion. However, the UK accounted for a smaller share in India’s textile exports; India currently exports textiles worth only $1.79 billion to the UK.

While predictions indicate a steady upward trajectory for these numbers, the key point to consider is whether India’s textile sector is adequately equipped to seize this opportunity? It would also be prudent to ascertain whether the India-UK trade deal can truly deliver the benefits for India in textiles that has been emphasised.

Attention to detail

Kumar Duraiswamy, Joint Secretary of the Tiruppur Exporters’ Association (TEA), offers both sides of the argument, stating that India is one of the largest textile manufacturing hubs as far as the UK is concerned. “A lot of core products that were earlier produced in India had shifted to Bangladesh and other manufacturing destinations due to the Least Developed Country (LDC) status. Now we are on a level playing field, and India is also a favourable manufacturing destination for UK retailers in terms of compliance, auditory requirements, and sustainability goals. India is well positioned on these grounds—these are all great advantages for our business to grow leaps and bounds with the UK,” he says.

He, however, notes that there are broader aspects to consider when we speak of scaling up the business. “For instance, we definitely have the capacities, but can they cater to the immediate increase in business? The answer is no, as we require tech upgrades, and additionally, the unavailability of labour in the manufacturing sector poses a challenge. The third aspect is the work culture, which needs a complete overhaul.”

According to him, buyers in Europe, the US, and other regions often express that China excels in timely deliveries and offers many advantages, while India falls short in the percentage of on-time deliveries. He emphasises that these issues need urgent and immediate attention. “If these issues are not addressed, signing of FTAs with the entire globe will not give any result,” he says without mincing any words.

TEA was set up in 1990 in Tiruppur, a textile cluster that accounts for 90% of the country’s cotton knitwear exports and 54% of overall knitwear exports. In FY 25, the cluster generated Rs 70,000 crore in total trade.

Surat, another textile cluster renowned for its production of man-made fibre garments, is rooting for the immediate implementation of the policies currently in the pipeline. “To capitalise on this situation, the government must ensure the supply of raw materials, and the industry policies should be executed urgently. The PM Mitra (Pradhan Mantri Mega Integrated Textile Region and Apparel), for instance, was announced some time ago; however, there has been no further activity on it. Besides this, we are awaiting the PLI 2.0 scheme for the textiles sector, which also needs to come into force soon,” Ashish Gujarati, Chairperson of Surat-based Aditya Textile Solutions, says.

In 2023, the government announced the sites for setting up 7 PM MITRA Parks, with the aim of enhancing the competitiveness of the domestic textiles industry by helping it achieve economies of scale as well as attract global players to manufacture in India. These will come up in Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh, and Maharashtra.

Complying with regulations
Industry experts also highlight the concerns surrounding UK regulations that could impact India’s textiles sector. Suresh Nair, Indirect Tax Partner, Consumer Products & Retail, EY India, says that value-addition norms will come in eventually, potentially requiring that 35% or 40% of the value addition occur in India, which implies that the goods must originate from India. “So, if the value addition is limited, can they still meet the requirements for the Certificate of Origin? Besides this, there will be other regulations pertaining to textile labelling and fibre composition and typical sanitary and phytosanitary regulations. There are also sustainability standards that need to be adhered to. So, from an export product standpoint, there will be various regulations and certifications to comply with. Our exporters will need to be aware of such technicalities, especially SMEs,” he advises.

Besides regulations, Nair adds, aligning with the market and market-specific products will also be key in taking the opportunity forward. “The UK, for example, could have a demand for a particular type of handloom textile, embroidered garment, or high fashion apparel. So, some of these alignments with respect to high-value and market-specific products will need to be seen. Getting our act in order with respect to ensuring we comply with their regulations and engage early with UK buyers will be key in leveraging the benefits of the FTA,” he emphasises.

Supply chain management
Streamlining the supply chain will also be crucial in making this a truly transformative era for the textile sector. The current fragmented nature of the supply chains results in increased transportation costs and extended lead times, ultimately causing delays in delivery timelines.

Alluding to this point, Nair affirms that our textile value chain is very geographically dispersed, with cotton being sourced from Gujarat, yarn from Tamil Nadu, and garmenting, say, from Tiruppur. “So, there will be inadvertent delays in the process. Our processes and reliance on traditional workflow are slowing down production. If we talk about catering to the fast delivery demands of UK buyers, the lead times will be shorter. If, say, Vietnam or Bangladesh has a delivery cycle of 60 days and if ours is longer than that cycle, then it is not going to be a very attractive proposition to the buyers. Fixing gaps on this front will be imperative for us to leap ahead,” he says.

India’s textiles sector is projected to reach $350 billion in market size by 2030, from the current $174 billion, as per the Ministry of Textiles. While the trade deal with the UK offers great potential and promise, it also underscores the significance of addressing the gaps that could enable India to benefit from the agreement, unlike previous FTAs where India did not gain. Only then can this mega opportunity be fully tapped by one of the fastest-growing major economies in the world.