The UK-India Free Trade Agreement (FTA) could create an incremental export opportunity of around US $900 million for India’s textile industry over the medium to long term, according to India Ratings and Research (Ind-Ra).

India exported US $2.2 billion worth of textiles and readymade garments to the UK in FY ’26. The rating agency estimates that increasing India’s share of the UK textile import market from the current 6.9% to around 10% could generate nearly US $900 million in additional exports.

The UK is India’s third-largest textile export destination, accounting for about 6.1% of the country’s total textile exports.

Ind-Ra said the tariff reductions under the FTA are expected to improve the competitiveness of Indian textile exports. 

However, the extent of the gains will depend on how companies expand capacity, control costs, meet regulatory requirements and maintain financial discipline.

The agency noted that large integrated textile companies are better placed to benefit from the agreement due to their scale, established customer relationships and stronger financial resources, while smaller exporters could face pressure if expansion is financed through excessive debt.

Ind-Ra also said Indian exporters could gradually gain market share from Chinese suppliers, although competition from Bangladesh is expected to remain strong due to its lower production costs and scale advantages.

The report added that compliance with environmental regulations, ESG reporting, traceability, ethical sourcing and product quality standards will become increasingly important. Companies already aligned with these requirements, including CBAM-related standards, are likely to be better positioned to benefit from the trade agreement.