India’s textile sector, a cornerstone of the country’s export economy, faces turbulence after the US imposed a 50% tariff on indian goods from august 27. While this move threatens shipments to the American market, experts suggest that exports to the united kingdom (UK) could partially offset the losses, thanks to the India-UK Free Trade Agreement (FTA).
1. US Tariffs Hit Hard
The US is the largest market for indian textiles, accounting for 28–29% of overall shipments. With the new tariff in place, indian exporters may find their products less competitive compared to rivals from Vietnam, Bangladesh, Pakistan, and China.
However, there’s a silver lining. Many US buyers had advanced their orders before the tariff deadline, which is expected to prevent a sharp fall in shipments for CY25. The more substantial decline may only appear in CY26, when the tariff impact is fully felt.
2. UK to the Rescue
The India-UK FTA is expected to provide a major boost for indian textile exports, particularly in ready-made garments (RMG) and home textiles. The UK’s textile and apparel import market is valued at nearly USD 23 billion, and the FTA creates a level-playing field for indian exporters against other competing nations.
Care Edge Ratings notes, “The expected decline in exports to the US is likely to be compensated by an increase in exports to the UK aided by India-UK FTA, and ongoing FTA negotiations with the EU.”
3. EU Free Trade Negotiations Could Help
In addition to the UK FTA, India’s ongoing trade negotiations with the european Union could open up further opportunities. These agreements are seen as strategic moves to reduce reliance on a single market and diversify export destinations, supporting long-term growth for the textile sector.
4. India’s Textile Export Snapshot
Total industry size: USD 160–170 billion
Domestic market share: 78–80%
Exports in CY24: USD 35 billion
RMG & home textiles: 63% of exports
Exports to the US: USD 10.5 billion
This shows that while domestic consumption remains robust, international markets are crucial for India’s textile growth.
5. Short-Term Risks vs Long-Term Strategy
The US tariff hike poses near-term risks, but strategic trade agreements with the UK and EU provide a safeguard for the sector. Exporters can leverage these agreements to maintain competitiveness, secure orders, and explore new markets.
Experts suggest that by shifting focus towards the UK and Europe, indian textile exporters can mitigate the immediate impact of tariffs while positioning themselves for sustainable growth in the global market.
6. Key Takeaways for indian Textile Exporters
Diversification is critical: Dependence on a single market like the US makes the sector vulnerable.
FTAs are lifelines: India-UK FTA and EU negotiations can offset losses.
Advance shipments help: Forward orders have softened the blow for CY25.
RMG & home textiles lead exports: Focus on high-demand segments ensures steady revenue.
Conclusion
While the US tariff hike presents a challenge, India’s textile sector is not without hope. Strategic international agreements and diverse export markets could help maintain India’s position as a global textile powerhouse, ensuring that growth continues despite short-term hurdles.
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