The FTA provides immediate zero duty on 100 per cent tariff lines, and opens up direct access to the $263 billion EU textile market

The India-EU Free Trade Agreement (FTA) is a shot in the arm for the Indian textile industry, which is facing crisis due to the additional tariff imposed by the US on August 27. The FTA provides immediate zero duty on 100 per cent tariff lines, and opens up direct access to the $263 billion EU textile market. It will give exporters a level playing field with competitors like Bangladesh and Vietnam that enjoy zero duty while India has 11-12 per cent currently, according to sources.

The implementation of FTA will take 6-8 months, which will help companies to engage in dialogue with potential customers. It takes about a year from the start of the dialogue with a potential customer to supply products, they say.

Hailing the FTA, the Apparel Export Promotion Council’s Chairman A Sakthivel said apparel exports to the EU could annually grow by 20-25 per cent after the operationalisation of FTA against the current growth rate of 3 per cent.

Apparel exports

While the EU accounts for roughly 28 per cent share in India’s apparel exports, India’s share is only 2.9 per cent in the EU’s apparel market. Some of EU’s major garment-importing countries — Germany, France, Spain and Italy — source substantially from India, and this deal will further boost our apparel exports to these economies, he said.

Kulin Lalbhai, Vice-Chairman of the Ahmedabad-based Arvind Ltd, said: “Elimination of 12-16 per cent tariffs in the €125 billion EU fashion market is a huge win. Indian manufacturers are now better positioned to expand market share against peers in Bangladesh and Vietnam.”

Sivaramakrishnan Ganapathi, Vice-Chairman and MD of the Bengaluru-based Gokaldas Exports, says the company’s exposure to the EU is between 16 per cent and 17 per cent of its annual topline. “Over the next 12 months, we are confident that the figure will increase substantially.”

According to Pallab Banerjee, Managing Director of the Gurugram-based Pearl Global Industries Ltd — a key manufacturing partner to global brands such as Zara, Tommy Hilfiger, Calvin Klein, Walmart and Target — the FTA is expected to improve both total exports and share in Europe, he said. Nearly 20 per cent of the company’s revenue already comes from the EU, he added.

“We will use the interim period before the India–EU FTA comes into force to prepare operationally rather than wait for policy execution,” he added.

global brands

With the FTA, global brands such as IKEA, JYSK, Carrefour, LIDL, ALDI, C&A and several others are expected to source competitive, high-quality products from India. The FTA is expected to significantly benefit over 235 cotton textile export clusters across the country, including Karur, Vapi, Ahmedabad, Panipat, Kachchh and Coimbatore, said Vijay Agarwal, Chairman, Chairman, The Cotton Textiles Export Promotion Council.

According to Prabhu Dhamodharan, Convenor, Indian Texpreneurs Federation, Coimbatore, the FTA can reset imbalance and unlock growth in labour-intensive exports, especially apparels. In the current year, India, China and Bangladesh grew 6-8 per cent in the EU apparel market, while Vietnam and Cambodia grew faster at 11-15 per cent, highlighting clear headroom for India, he said.

India’s apparel exports to the EU stand at $5.5 billion, with knitwear at around 56 per cent and woven apparel at about 45 per cent . Both segments are well-placed to scale, he said.