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India-EU FTA to Slash Textile Tariffs, Boost Exports to $40 Billion by 2027

The concluded India-EU Free Trade Agreement will eliminate EU import duties on Indian textiles, leveling the playing field with competitors like Bangladesh and Pakistan. The deal grants India preferential access across 97% of EU tariff lines, with 91% of Indian exports facing zero duties from the effective date. Union Minister Piyush Goyal stated the textile industry's exports could grow from $7 billion to $30-40 billion rapidly, potentially generating 6-7 million jobs. The agreement, likely implemented by 2027, also significantly reduces Indian tariffs on EU auto imports and covers sectors like chemicals and leather.

Key Points: India-EU FTA to Eliminate Textile Tariffs, Boost Exports

  • Zero EU tariffs for 91% of Indian exports
  • $4B+ tariff savings for EU exporters
  • Textile exports could surge to $30-40B
  • Potential for 6-7 million new jobs
  • Auto import duties to drop from 110% to 10%
3 min read

India-EU FTA to level textile playing field with Bangladesh, Pakistan as tariffs fall: Jefferies

India-EU Free Trade Agreement will remove EU import duties on Indian textiles, boosting exports to $30-40B and creating millions of jobs by 2027.

"the Indian textile industry... has the potential to grow from USD 7 billion to USD 30-40 billion very quickly. - Piyush Goyal"

New Delhi, January 28

India's textile and apparel sector is poised for a significant boost following the conclusion of a Free Trade Agreement between India and the European Union, which will eliminate import duties on Indian textile exports to the bloc, according to a Jefferies equity research report.

The agreement is expected to provide a major boost to India's textile and apparel sector, which currently faces tariffs of up to 12% in the EU, compared with zero duties for competitors such as Pakistan, Bangladesh and Turkey. Similar benefits are expected for exports of chemicals, leather products and footwear.

EU imports nearly USD 125 billion worth of textiles and apparel annually, making it one of the world's largest markets for clothing and fabric.

Jefferies analysts note that India has secured preferential access across 97% of EU tariff lines, covering nearly 99.5% of trade value. As a result, around 91% of Indian exports to the EU will face no import duties from the effective date of the agreement. In return, India will gradually reduce tariffs on 97% of EU exports over a period of five to ten years, translating into tariff savings of more than USD 4 billion for European exporters.

With tariffs set to drop to zero in labour-intensive sectors such as textiles, footwear, gems & jewellery, likely by 2027, India's competitiveness will jump.

Earlier, Union Minister of Commerce and Industry Piyush Goyal, on the FTA, had said the Indian textile industry is set to benefit from the India-EU FTA, with exports, and has the potential to grow from USD 7 billion to USD 30-40 billion very quickly.

He noted that this could generate 6-7 million jobs in the labour-intensive sector.

In the auto sector, the Jefferies report said tariffs on cars imported from the EU to India will be reduced from 70-110% to as low as 10%, with an annual quota of 250K units.

"We see limited impact on listed Indian OEMs as most of the vehicles, excluding certain high-priced models, of European OEMs are already manufactured in India or assembled from CKD kits that attract just 16.5% import duty," it said.

India's annual goods trade with the EU at ~USD 140bn exceeds trade with China or the US. Exports to the EU, at an annualised ~USD75bn (17% of India's exports), are ~80% of those to the US.

India-EU trade has been largely balanced, except for the petroleum product surplus India has seen since the 2022 Russia-Ukraine conflict. The FTA negotiations were initiated in 2007, and a renewed impetus since 2022 has finally led to the agreement now.

The procedure steps on both sides imply that the agreement may be implemented in 2027.

- ANI

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Reader Comments

P
Priya S
Great to see this finally happening after so many years of negotiation! The potential for 6-7 million new jobs is huge, especially for women in rural areas. My only concern is whether our infrastructure and supply chains are ready to handle this scale-up.
R
Rohit P
Finally! We've been waiting for this level playing field. Our quality is often better than competitors, but the tariff made us uncompetitive. This FTA should boost 'Make in India' in a big way. Exciting times for exporters in Tirupur and Ludhiana!
S
Sarah B
As someone who follows trade policy, this seems like a well-balanced deal. India gets access for textiles, the EU gets it for autos and other goods. The phased reduction over 5-10 years gives our industries time to adjust. Smart diplomacy.
V
Vikram M
Hope the benefits reach the actual workers and small business owners, not just the big corporates. We need to ensure fair wages and working conditions as the industry grows. The job creation potential is the best part of this news.
K
Karthik V
The auto tariff reduction to 10% is interesting. While the report says impact on Indian OEMs is limited, I hope our domestic car industry remains competitive. We shouldn't become just an assembly hub for foreign brands. Need to focus on R&D and indigenous technology too.
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