New Delhi — India's textile and apparel exporters are celebrating the conclusion of a landmark Free Trade Agreement with the European Union on January 27, 2026, just months after being hit by steep American tariffs. The historic deal, signed at the India-EU Summit on Tuesday, offers Indian textile manufacturers critical relief by eliminating tariffs on critical segments and significantly reducing duties that had made competing in key markets increasingly difficult.
The timing couldn't be better for the sector. In August 2025, Indian textile and apparel exporters faced a devastating blow when the United States imposed 50 percent tariffs on their products, threatening the livelihoods of millions employed in this labor-intensive industry.
Key Facts
• India's textile sector employs 45 million people directly, making this EU market access a critical opportunity for regional economic growth and employment generation across 342 districts.
• The FTA eliminates duties on Ready-Made Garments (60 percent of exports), reduces tariffs on cotton textiles by up to 12 percent, and provides enhanced access for man-made fiber products that form crucial segments of Indian exports.
• Commerce officials project textile exports to the EU could grow from $7.2 billion currently to $30-40 billion "very quickly," creating a transformational opportunity for MSMEs and labor-intensive manufacturing clusters across the country.
With the EU market now opening up through zero-duty access on textiles and tariff reductions of up to 12 percent across major segments, exporters see a lifeline to recover lost revenues and expand operations.
Commerce Minister Piyush Goyal has stated that Indian textile exports hold the potential to surge from the current $7. 2 billion to the EU toward $30 to $40 billion "very quickly" once the deal takes full effect.
This growth trajectory represents more than just numbers—it translates to new orders for factories, expanded production capacity, and thousands of additional jobs across clusters in Tiruppur, Bengaluru, Surat, and other manufacturing hubs.
The FTA corrects a long-standing competitive disadvantage that Indian exporters faced against rivals from Bangladesh, Pakistan, and Turkey, who already enjoyed preferential market access in Europe. Now, Indian manufacturers can compete on equal footing in one of the world's most sophisticated consumer markets worth over $263 billion in annual textile and apparel imports.
The deal goes beyond tariff elimination. Ready-made garments originating from Tiruppur and Bengaluru will gain zero-duty access immediately, while cotton textiles anchored in Karur, Panipat, and Ahmedabad will benefit from significant tariff reductions.
Man-made fiber and synthetic textiles led by Surat and Mumbai will also see enhanced competitiveness in European fashion and home furnishing markets.
Industry analysts have described this as India's largest trade diplomacy achievement of the decade. The agreement covers 97 percent of trade value between the two economies, with India securing preferential access across 91 percent of EU tariff lines.
Women workers, who dominate the ready-made garment sector in cities like Tiruppur and Bengaluru, stand to gain particularly from increased production orders and expanded employment opportunities. The deal's focus on labor-intensive, artisanal, and MSME-driven textile trade directly supports the communities most dependent on this sector.
European Commission President Ursula von der Leyen described the agreement as the
emphasizing that it would create
For Indian exporters, the deal represents more than geopolitical significance—it's economic survival and growth after months of uncertainty.
The agreement also includes comprehensive measures to address non-tariff barriers through strengthened regulatory cooperation, customs facilitation, and transparent trade rules. This means Indian exporters won't just benefit from lower duties but also from smoother, faster customs processes when shipping goods to Europe.
Commerce Minister Piyush Goyal stated, capturing the transformational potential of this trade agreement for India's manufacturing sector.
The broader strategic context makes this deal particularly significant. India sought a reliable trade partner to offset the impact of American tariffs and trade tensions, while the European Union aimed to reduce trade dependence on China and strengthen economic partnerships with trusted allies.
The FTA reflects both parties' commitment to moving away from protectionist policies and building resilient, rules-based trade relationships.
Texas-based and other American importers of Indian textiles now face a critical decision: they can continue sourcing from India at higher costs due to American tariffs, or shift production sourcing to the EU, where Indian manufacturers can now compete at lower prices. This dynamic will likely push some American fashion and home furnishing retailers to reconsider their supply chains.
The Modi government has positioned this trade agreement as a cornerstone of its "Viksit Bharat 2047" vision—building India into a competitive, trusted, and forward-looking global textile and apparel hub. With the EU deal in place, Indian exporters now have a concrete pathway to scale production, invest in technology, and upgrade manufacturing standards to meet global sustainability requirements.
Do You Know?
India's textile exports originate from 342 districts across the country, making this one of the most geographically distributed industries in India. From Kashmir's handicrafts to Kerala's coir products and Tamil Nadu's ready-made garments, the EU deal benefits communities across every region, reflecting India's broad-based and inclusive manufacturing base.
Key Terms
• Free Trade Agreement (FTA): A trade pact between two or more nations that eliminates or significantly reduces tariffs and trade barriers, allowing goods and services to move across borders more freely and at lower costs.
• Tariff: A tax imposed by a government on imported or exported goods. High tariffs make foreign goods expensive for consumers; low or zero tariffs make them more affordable and competitive.
• Zero-duty Access: A trade benefit where products cross international borders without any tax or customs duty, making them equally or more price-competitive compared to locally-produced alternatives.
• MSME: Micro, Small, and Medium Enterprises—small-scale businesses that form the backbone of India's textile and manufacturing sectors, often employing dozens to hundreds of workers per factory.
• Non-tariff Barriers: Trade obstacles beyond tariffs, such as complicated customs procedures, regulatory differences, or safety certifications that slow down cross-border commerce and increase costs for exporters.
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