India UK textile trade deal news: One of the key highlights for Indian industry under the India-UK trade deal signed on Thursday is the benefit extended to India’s labour-intensive sectors such as textiles, footwear, and gems and jewellery, which will now see tariff elimination compared to pre-deal rates ranging from 4 to 12 per cent.
However, tariff elimination under a trade deal does not always translate into export gains—particularly in advanced markets where competitors such as Vietnam, Bangladesh, and China already have secured supply chains and a well-established presence.
Even with a tariff of 11.5 per cent on its products, China commands over 25 per cent of the UK’s total imports of ready-made garments (RMG). The UK imports over $5 billion worth of RMG annually from China alone, driven by its competitive advantage.
In contrast, India’s share in UK RMG imports currently stands at 6 per cent, despite a prevailing duty of 9 per cent in that segment. India exports RMG worth only $1.2 billion to the UK and expects to increase outbound shipments by 30–40 per cent once the deal takes effect. But much would depend on competitiveness and not tariff concession alone.
Several competitors in the UK market already enjoy zero-duty access and have entrenched supply chains. Bangladesh, for instance, holds a 20 per cent share of UK RMG imports and benefits from zero-duty access to the premium market due to its Least Developed Country (LDC) status. Turkey, too, has zero-duty market access for its RMG exports to the UK and commands an 8 per cent share.
Adverse experience in Japan
India has often failed to increase market share even when granted concessional tariff rates under FTAs, a working paper from the Indian Institute of Management Ahmedabad, released in March 2023, said.
“A case in point is India’s fuel and textile exports to Japan. India’s fuel exports dropped by as much as 65 per cent in the years following the Indo-Japan FTA. Similarly, India has a very low (0.05 per cent) share in the Japanese textile market despite zero tariffs under the Japanese CEPA. This points to systemic issues such as quality and cost that undermine the competitiveness of Indian goods,” the report noted.
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Eroding market share and challenges
The report pointed out that India held a quarter of the global market share in textiles in the early 2000s. However, this has eroded over the years, partly due to the absence of trade agreements with major importers such as the US and the EU.
“India’s market share decreased from 26 per cent in 2000 to 21 per cent in 2003, and declined further in the following years. In contrast, major textile exporters such as Vietnam, Malaysia, Turkey, and South Korea have trade agreements in place with at least one major importer. These trade agreements enabled duty-free access while India faced tariffs as high as 32 per cent in the US for products such as T-shirts,” it said.
Experts also pointed to structural issues within the Indian textile industry, including an inverted duty structure—where inputs or raw materials are taxed at a higher rate than finished products.
This has long burdened Indian textile producers, making domestic products more expensive than imported ones. However, experts noted that India holds potential to develop high-value products and services closely aligned with its existing capabilities.
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