India-EU Agreement 2026: Textiles and Apparel in the Spotlight

India and the European Union (EU) have finally signed the long-awaited Free Trade Agreement (FTA) on 27 January 2026, ending nearly 20 years of discussions and bringing a big change in the dynamics of international trade. The deal, considered the “mother of all trade deals” by EU leaders, will help reshape bilateral commerce between two of the leading markets and can also boost global trade.

Under this agreement, the majority of goods traded between India and the EU will become cheaper. This is because the tariffs are sharply reduced or eliminated, with 96.6% of trade by value covered by tariff cuts on EU exports, and 99.5% of Indian exports will gain preferential access to the EU market.

As per economic forecasters, bilateral trade can grow from about $136.5 billion from 2024-2025 to $200 billion by 2030. Whereas tariff savings of up to €4 billion (₹40,000 crore) annually may materialise for European producers alone.

But among the winners and losers created by this pact, one Indian sector in particular stands out above all others.

What Makes Textiles and Apparel the Clear Winners of the India-EU FTA?

According to trade analysts and government estimates, India’s textiles, apparel, leather, footwear, and allied labour-intensive sectors are going to be the top beneficiaries due to the India-EU FTA deal. Here are the main reasons for this: -

Zero-Duty Entry to the EU Market

Before the agreement, Indian Textiles and garments had to pay import duties to enter the EU market, which was a significant cost disadvantage compared to competitors like Bangladesh and Vietnam. But the new FTA has abolished the tariffs on these products. Hence, this will help Indian exporters reclaim their share in the EU’s $263.5 billion textile and apparel import market.

Massive Export Potential

As of now, India exports around $7.7 billion worth of textiles and apparel to the EU, which is around 20% of the country’s total textile exports. Zero-duty means Indian products will become more price-competitive across European retail chains.

This gives India a chance to rapidly expand exports in major clusters across:

• Surat (Gujarat) – textiles and man-made fibres

• Tiruppur (Tamil Nadu) – knitwear

• Ludhiana (Punjab) – woollen garments

• Kanpur & Agra (UP) – leather and footwear

• Hyderabad–Warangal (Telangana) – apparel manufacturing

Jobs and MSME Participation

This is where the impact gets real. Textiles, leather, and footwear have already employed millions of workers. Due to zero tariffs and smoother EU market access, exporters will be getting more orders. This will create many new jobs.

Fair Competition with Bangladesh and Vietnam

Currently, exporters in countries like Bangladesh and Vietnam face zero duties in the EU under preferential trade deals, while India’s textiles pay duties of 4% to 26%. With the new FTA, India enters on a level playing field, which economists say could reverse decades of market share losses.

Which Other Sectors are Benefiting?

While textiles emerge as the outright winner, there are other industries that may get significant gains:

• Gems & Jewellery

India’s exports, which are currently valued at $5.2 billion to the EU in 2024, can double to $10 billion in the coming years due to zero-duty access.

• Marine & Leather Goods

Marine products, which previously faced duties up to 26%, will now enter EU markets duty-free, significantly boosting competitiveness.

• Chemicals & Plastics

These exports, which have to face tariffs of 10-13%, will also see elimination, benefitting companies in Gujarat, Maharashtra and beyond.

• Pharmaceuticals

Duty elimination on medicines and intermediates will strengthen India’s standing in EU markets and support generic drug makers.

What are Investor Takeaways?

The India–EU FTA is a major structural win for India’s export-led growth story. As the tariffs have been removed on almost all Indian exports to the EU, the deal will improve price competitiveness, boost manufacturing activity, and strengthen India’s position in global supply chains.

Labour-intensive industries like textiles, apparel, leather, and footwear will benefit the most by supporting job creation, MSMEs, and regional industrial clusters. Over time, this can lift export earnings, improve trade balances, and attract fresh investment into manufacturing hubs.

For stock investors, the focus should shift to export-oriented companies in textiles, apparel, chemicals, pharmaceuticals, gems, and marine products. Accumulating fundamentally strong players with EU exposure, scalable capacity, and healthy balance sheets could offer long-term growth opportunities rather than short-term trading bets.

Sources

NDTV profit

Business today

TOI

Moneycontrol

Moneycontrol

AP News

Policy.trade

The Guardian

Reuters.com