India is expected to gradually increase its market share from 5 per cent to 8 to 9 per cent in the European Union’s (EU’s) ready-made garment (RMG) imports, unlocking an incremental annual export opportunity of nearly USD 4 to 4.5 billion over the medium term, CareEdge Ratings said.
With exports worth USD 4.5 billion and USD 4.75 billion in CY24 and 11MCY25, respectively, India holds around 5 per cent market share in the EU's RMG imports. At the same time, Bangladesh, Turkey, Vietnam, and Pakistan enjoy duty-free access, giving them a 12 per cent tariff advantage over India.
“The India-EU FTA is the need of the hour for India, not only to maintain its market share but also to neutralise the impact of the 50 per cent tariff announced by the US Government. It is described as the ‘mother of all trade deals’ because it creates a level playing field for accessing the EU’s nearly USD 105 billion RMG market, the largest in the world,” the report added.
Once fully implemented by 2027, India will have a clear 12 per cent duty advantage over China, which presently holds the largest market share in the EU’s RMG imports with exports of USD 27 billion in CY24. China is expected to lose its share in the EU’s RMG market due to the ‘China Plus One’ sourcing strategy adopted by global apparel brands and retailers.
Additionally, socio-political uncertainties in Bangladesh may also lead apparel brands and retailers with a significant presence in the country to diversify their sourcing, thereby benefiting India, among others.
“Despite the expectation of a sharper decline of 10 to 15 per cent in RMG exports to the USA in CY26, assuming no rollback of tariffs, the overall RMG exports are expected to decline only marginally by around 5 per cent, benefitting from the cushion provided by diversification to newer markets and benefits from implementation of the India-UK FTA,” stated Krunal Modi, Director, CareEdge Ratings.
The report added that to fully capitalise on the potential, Indian manufacturers must expand their capacities to meet the expected surge in demand. India’s increased competitiveness post-duty removal and continued favourable policy regimes in India, such as removal of Quality Control Order (QCO) on polyester yarn, the PM Mega Integrated Textile Region and Apparel (PM MITRA) park and the Production Linked Incentive (PLI) scheme, is expected to aid the sector in becoming more cost competitive and thereby grab these additional export opportunities.
“The India– EU FTA is expected to unlock nearly USD 4-4.5 billion of incremental annual export opportunities for the RMG sector and act as a catalyst for large-scale investments across the textile value chain, generating employment, particularly for women and enhancing foreign exchange earnings for the country,” said Ranjan Sharma, Senior Director, CareEdge Ratings. |
