The India-EU free trade agreement will correct a tariff disadvantage faced by textile exporters against competitors like Bangladesh, Pakistan and Turkey in the 27-nation bloc by providing zero-duty access to its USD 263.5 billion textiles export market, the government said on Tuesday.

India and the European Union (EU) on Tuesday announced the conclusion of negotiations for a free trade agreement (FTA), an important milestone in one of India's most strategic economic partnerships.

Currently, the European Union is the second biggest market for India's textile and apparel exports, after the US.

The US, which has levied 50 per cent tariffs on Indian goods, is the single-largest market for India's textile and apparel exports, accounting for almost 28 per cent of the country's textile and apparel exporters' total revenue.

"The FTA corrects a long-standing tariff disadvantage vis-a-vis competitors, such as Bangladesh, Pakistan and Turkey. The agreement gives a decisive boost to the labour-intensive sector, enhancing price competitiveness and expanding market access in one of the world's most sophisticated consumer markets. The textile sector employs around 45 million people directly in India," the Textile Ministry said.

Gaining zero-duty access in textiles and clothing, covering all tariff lines and reducing tariffs by up to 12 per cent, would open up the EU's Rs 22.9 lakh crore (USD 263.5 billion) export market, the ministry said.

Building on India's current Rs 3.19 lakh crore (USD 36.7 billion) in global textile and apparel exports, including USD 7.2 billion to the EU, such access would significantly expand opportunities, particularly in yarn, cotton yarn, man-made fibre apparel, Ready-Made Garments, men's and women's clothing and home textiles, it added.

Moreover, the ministry said this would enable MSMEs to scale, generate employment, and reinforce India's positioning as a reliable, sustainable, and high-value sourcing partner.

The European Union is India's second-largest export destination for textiles and apparel, after the US.

India's textile exports to the EU have shown positive growth in the last 5 years and are diversified across multiple value-added and labour-intensive segments. Ready-Made Garments form the largest component (60 per cent) of exports, followed by Cotton textiles (17 per cent), Man-made fibre and textiles (12 per cent).

Handicrafts (4 per cent), Carpets (4 per cent), Jute Products (1.5 per cent), Woollen (0.6 per cent), Handloom (0.6 per cent) and Silk Products (0.2 per cent), form an important part of India's textile exports to the EU, underscoring the labour-intensive sectors of textiles, apparel and handicrafts, artisanal and MSME-driven character of India's textile trade with the European market.

Improved access to the EU market is expected to boost production, capacity utilisation and employment across labour-intensive MSME clusters, the Textile Ministry stated.

The FTA will also encourage investment, technology transfer, and sustainability-linked up-gradation, particularly in MMF, technical textiles and green manufacturing aligned with EU standards, facilitating deeper integration into global value chains, it added.