After three years of negotiations a long anticipated free trade agreement (FTA) was signed between the the UK and India on Tuesday.
While it will be a huge step up for bilateral trade, it will particularly help certain sectors like textile and apparel and footwear which will have zero percent duties under this agreement—down from the present tariff of up to 12 percent.
Both sides hailed it as a ‘landmark event’, a term echoing down the supply chains in India, where it has been long awaited.
“Today we have agreed a landmark deal with India—with one of the fastest growing economies in the world,” UK Prime Minister Keir Starmer noted.
Indian Prime Minister Narendra Modi noted on twitter on Tuesday that he was “delighted” to speak with his friend Starmer. “In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial Free Trade Agreement, along with a Double Contribution convention.” He noted that this would “catalyze trade, investment, growth, job creation, and innovation” in both economies.
The ministry of commerce and industry announced it to be a “historic and ambitious deal to boost jobs, exports and national growth” noting that 99 percent of Indian exports to the U.K. would benefit from zero duty. It said that this opened up massive export opportunities for labor intensive sectors such as textiles, leather, footwear, gems and jewelry, sporting goods and toys, among other sectors.
“This brings us closer to our goal of becoming a global economic powerhouse. It protects our core interests while opening doors to India’s greater participation in global value chains,” union commerce and industry minister Piyush Goyal observed.
“It’s very good news for the apparel industry, and for the backward linkages, as well,” Naren Goenka, chairman, Bharat Tex told Sourcing Journal, while pointing out that the details of the implementatio are still awaited. “There will be definitely be a massive export opportunity, with a lot of benefits for the labor intensive industries,” he said.
The sector provides employment to more than 45 million people.
India exported textile and apparel worth $1.9 billion to U.K. in 2024, of which about 85 percent was apparel. India is the fourth largest textile and apparel exporter to the U.K accounting to about 6.6 percent of its $27 billion of imports. U.K. is also the fifth largest market for India’s textile and apparel products.
On the other hand, imports of textile and apparel from U.K. by India were $67 million in the same year indicating a huge trade surplus in India’s favor.
“One of the major reasons of India’s low share in U.K. is the duty difference compared to our competitors like Bangladesh and Vietnam who are having preferential market access. With the India – U.K. FTA in place, Indian textile and apparel exports will now have level playing field compared to competitors and will thus provide a big boost to our exports. Moreover, this FTA has come at a time when due the ongoing hustle in major textile and apparel markets like the U.S., Indian exporters are looking for other reliable destinations,” Chandrima Chatterjee, secretary general, Confederation of Indian Textile Industry (CITI) told Sourcing Journal.
Manufacturers said that this has been a long time coming. Last year, a leading manufacturer told Sourcing Journal that it was not a matter of if but when the FTA between the two countries would be signed.
Meanwhile, manufacturers said that they had been waiting—fingers crossed—for the “much needed impetus” for the sector that had been caught in limbo for several years. There were particularly tense moments as negotiations took up again in February after a nine month pause.
Now, several manufacturers spoke about not just anticipation, but a huge sense of relief.
“For the textile and apparel industry, this unlocks fresh opportunities by reducing tariff barriers, encouraging technology exchange, and enhancing market access,” Mukesh Kansal, Chairman, CTA Apparels observed, adding that this would create “more sustainable and competitive supply chains.”
Many of them re-emphasized the point made by Chatterjee, that the FTA was particularly important given that neighboring countries like Bangladesh, Sri Lanka, and others across Asia like Vietnam and Cambodia have long held a major sourcing edge over India with the zero-tariff advantage afforded to them through free trade agreements. “It’s been hard to compete with that kind of price advantage,” a Tirupur based manufacturer commented.
Discussing this new point of hope within online industry forums, manufacturers echoed the point made by commerce secretary Sunil Barthwal, who called it the “most comprehensive free trade deal ever entered into by India.” He referred to it as the “gold standard for our future engagements” and a “game changer that would set India further on the path to rapid economic growth.”
Analysts estimated that depending on the dates of implementation, Indian exports could see a boost of more than 20 percent with this FTA in place and that U.K. based brands like Next and Marks & Spencer could increase their sourcing from India.
A government official, who asked not to be named, said that although the deal was a huge landmark in itself— these negotiations started when Boris Johnson was prime minister—the real work would begin with the implementation.
Indian manufacturers would have to be quick to scale up, maintain high environmental standards, and look to step up with more innovative products.
“We hope that the manufacturers across the country will be able to use this opportunity and as sourcing and exports are being re-imagined all over the world with U.S. president Donald Trump’s tariff structures, India can see a new way into the future as well,” he said.
Meanwhile, Britain too has marked the deal as one that would offer a huge advantage, with the expectation of an increase in bilateral trade by almost 5 billion pounds ($6.7 billion) a year to the British economy which would go up to 25.5 billion pounds ($34 billion) a year from 2040.
Tariffs on products including Scotch whisky and English gin shipped to India will be slashed under the FTA.