India–EU FTA set to rebuild India's apparel edge lost after GSP

With tariffs of 12-16 per cent on textiles and apparel set to be eliminated, Indian manufacturers expect the agreement to significantly narrow the pricing gap with competitors such as Bangladesh and Vietnam, which have long enjoyed preferential access to the European market. Textile and apparel industry experts believe the tariff relief will not only drive export growth but also unlock new investment cycles across manufacturing, processing and allied infrastructure.

Kulin Lalbhai, vice-chairman of Arvind Limited, believes that the FTA would help Indian manufacturers reclaim ground lost after the withdrawal of Generalised System of Preferences (GSP) benefits. In a post on LinkedIn, he said, “For textiles and apparel, the India-EU FTA marks a major win with the elimination of 12-16 per cent tariffs, unlocking stronger access to the EU’s €125 billion fashion market. Indian manufacturers are now better positioned to reclaim competitiveness lost post-GSP and expand market share against peers in Bangladesh and Vietnam. What excites me equally are the opportunities in digital trade, sustainable fashion and investment flows into real estate linked manufacturing ecosystems. With the EU-India Trade & Technology Council (TTC) in place, the FTA could catalyse deeper partnerships in clean-tech, AI governance, and digital infrastructure.”

From an exporter’s perspective, Europe continues to be a crucial growth market for Indian apparel companies. Pallab Banerjee, managing director of Pearl Global Industries said, “Pearl Global Industries Limited (PGIL) is already servicing prominent EU customers from its other countries of production and a small amount from India as well. Approximately 20 per cent of the total revenue of PGIL is from EU. India-EU FTA is expected to bring significant improvement to the total number and the percentage share.”

Banerjee added that India is well positioned to benefit as the EU tightens regulations around sustainability and traceability. “With the EU continuing to tighten requirements around ESG compliance and end-to-end traceability, PGIL believes India is well positioned to emerge as a stronger sourcing destination. The company already has the necessary infrastructure and compliance frameworks in place across its Indian operations, enabling it to scale capacity quickly in line with evolving regulatory expectations.”

He also highlighted the historical tariff disadvantage faced by Indian exporters. He said, “Historically, India’s apparel exports have operated at a disadvantage in the EU market due to tariff-free access enjoyed by competing countries, while Indian exports were subject to duties of 9.96 per cent under the GSP regime and, following its withdrawal, approximately 12 per cent. This differential has impacted India’s price competitiveness despite strong capabilities in quality and compliance.”

According to Banerjee, the proposed removal of tariffs under the FTA could trigger a fresh investment cycle across the textile and apparel value chain. He said, “The proposed removal of this tariff under the India-EU FTA would be a significant positive step, helping level the playing field for Indian manufacturers. It is expected to catalyse fresh investments in advanced synthetic raw materials, modern processing technologies and capacity expansion across the textile and apparel value chain. Over the medium-term, this would strengthen India’s position as a reliable, compliant and scalable supplier to the European market.”

As the India-EU FTA moves closer to implementation, industry leaders see the agreement as more than a tariff-cutting exercise. By restoring price competitiveness and aligning trade with sustainability, digitalisation and investment flows, the pact is expected to reposition India as a long-term, high-quality sourcing partner for Europe, provided execution and policy support keep pace with industry expectations.

Fibre2Fashion News Desk (CG)