Wed May 21,
Insights
ICRA expects India's textile export volumes to the UK to double in the next five to six years post implementation of the revised tariffs, leading to an addition of incremental capacities in four to five years.
While the UK's share in apparel and home textile exports by India had remained stable at 7-8 per cent over the past five years, the same is expected to reach 11-12 per cent by 2027.
Indian rating agency ICRA expects the country’s textile export volumes to the United Kingdom to double in the next five to six years post implementation of the revised tariffs, leading to an addition of incremental capacities in the next four to five years to execute orders.
India and the United Kingdom recently concluded trade talks, and a free trade agreement (FTA) was reached on May 6 after three years of negotiation. While the broad terms have been agreed upon, the FTA is expected to be operational in 2026, subject to legal review.
Currently, an 8-12 per cent duty is levied by the United Kingdom on apparel and home textiles imported from India. In the FTA, tariffs have been eliminated on 99 per cent of Indian goods, including textiles.
The conclusion of the FTA is expected to encourage capital investments in the apparel and home textile sector, apart from generating employment opportunities and better earnings for the exporters with changing product mix, ICRA noted.
While the United Kingdom’s share in apparel and home textile exports by India had remained stable at 7-8 per cent over the past five years amidst flattish growth, the same is expected to reach 11-12 per cent by 2027, reflecting a 11-per cent compounded annual growth rate (CAGR) between 2024 and 2027.
In 2024, China was the biggest apparel and home textiles exporter to the United Kingdom, with nearly 25 per cent share, followed by Bangladesh (22 per cent), Turkey (8 per cent) and Pakistan (6.8 per cent).
Once the FTA gets implemented, with zero-duty access on apparel and home textiles exported, India would have a level playing field compared to the existing duty-free access nation status like Bangladesh, Vietnam and Pakistan, ICRA said in a research report.
In 2024 and the first two months of 2025, India’s apparel and home textiles exports to the United Kingdom witnessed 6 per cent and 7 per cent year-on-year (YoY) growth respectively.
To meet the additional demand, the Indian textile industry is also expected to invest in incremental capacities in garmenting segment. On the other part of the value chain, namely spinning, fabric processing, etc, the spend is likely to be relatively lower given the inherent over-capacity situation in the country, ICRA noted.
Indian apparel exporters’ competitive positioning would strengthen considerably with elimination of import duties by the United Kingdom. Exports from existing manufacturing hubs like Tiruppur, Surat, Delhi National Capital Region are likely to improve.
The UK retail giants are likely to expand their sourcing from India for cost-effective production and diverse product offerings facilitated through the FTA. This shift will benefit Indian suppliers boosting their revenues and enhancing their reputation in the global apparel industry, ICRA added.