With US trade deal and EU FTA, will India's textile sector get its moment?

With better access to the US, EU and UK markets, supportive Budget 2026 measures, and pressure on rival Asian exporters, India's textile sector may be entering a rare window of opportunity

The trade agreement announced between India and the United States on Tuesday (February 3) has put renewed focus on India’s textile and apparel export sector, with tariff relief and improved market access expected to directly benefit one of the country’s largest manufacturing industries. 

The timing is notable, as India’s textile and apparel (T&A) export industry has been gaining ground steadily, while competing Asian suppliers are facing varying degrees of disruption.

How big is India’s textile export industry

India’s textile and apparel exports were valued at $36.61 billion in FY25, a year-on-year increase of 6.32 per cent, accounting for about 8.37 per cent of India’s total merchandise exports. 

 

India currently holds a 3.9 per cent share of the global textile and apparel market and ranks as the sixth-largest exporter worldwide. Unlike other major Asian competitors, India’s export basket spans cotton yarn, fabrics, garments and made-ups, offering buyers a relatively diversified sourcing base. 

The biggest destinations for Indian textile exports remain developed markets, with the US, the European Union and the United Kingdom together absorbing $20.7 billion worth of Indian textile and apparel exports in FY25.

Why India’s trade deal with the US matters

The US is India’s single largest apparel market, accounting for roughly one-third of garment exports. Industry experts are of the opinion that even marginal tariff advantages can influence sourcing decisions in this market, particularly in price-sensitive categories such as knitwear, home textiles and cotton garments. 

"MSMEs who were hardest hit due to the punitive tariffs of the US, will get good and strong access to the US market which is the biggest market in the world. Now with this deal, it's a great opportunity to start it again and our MSMEs will definitely get that access." said Ranjeet Mehta, CEO & Secretary General, PHD Chamber of Commerce and Industry (PHDCCI). 

Industry estimates suggest the India-US trade step could lift textile and apparel exports to the US by double digits over the next few quarters, depending on how quickly buyers reallocate orders.  ALSO READ | India likely to buy petroleum, defence goods, aircraft from US under deal  Ajay Sahai, director general of the Federation of Indian Export Organisations (FIEO) said, “preferential market access, greater tariff predictability and supply-chain confidence are aligning at a time when global buyers are actively looking to diversify sourcing. This creates a window of opportunity for Indian exporters to scale up responsibly and competitively. This will spur investment in Indian textiles also, both domestically and through FDI routes.”

Bangladesh textile export slowdown creates space

One reason global buyers are re-evaluating sourcing strategies is the slowdown in Bangladesh, the world’s second-largest apparel exporter after China. 

Bangladesh’s ready-made garment exports weakened across major markets in the second half of FY26 due to domestic political instability, labour disruptions and law-and-order concerns that have increasingly affected factory operations and shipment schedules. Additionally, in April last year, Bangladesh’s National Board of Revenue suspended the import of yarn from India by land, raising input costs and eroding the cost advantage for Bangladeshi exporters. 

Garments make up over 80 per cent of Bangladesh’s total exports, leaving the economy highly exposed to disruption. For global brands, reliability matters as much as cost, and delays or cancellations often lead to temporary reallocation of orders to other suppliers.

Vietnam remains strong but under pressure

Vietnam continues to be a major apparel exporter, with shipments estimated at around $40 billion in 2025. However, industry assessments suggest the sector missed some growth targets and faced margin pressure due to the current 20 per cent baseline tariff on its textile and apparel exports. 

Vietnam’s heavy dependence on imported yarn and fabric has also limited its ability to absorb cost shocks created by US tariffs, reducing pricing flexibility at a time when buyers are pushing for lower prices and shorter lead times.

UK and EU trade deals widen India’s market access

Beyond the US, India’s market access has improved on other fronts, with the country announcing a trade agreement with the European Union and concluding a free trade agreement with the UK in 2025. 

Together, industry experts say, India now has preferential or improving access to three of the world’s biggest apparel markets — the US, the EU and the UK — at the same time. This is expected to improve tariff conditions and reduce friction in markets that account for a large share of global apparel demand.

Budget 2026 support strengthens the supply side

Domestic policy has added to the momentum. The Union Budget for FY27 increased allocations for textile-linked schemes and flagged the sector as part of India’s broader manufacturing push. 

While budget measures take time to translate into capacity expansion, they improve confidence among buyers looking for stable, long-term sourcing partners.

Weaker rupee adds a pricing edge

Currency movements, especially the current weakening rupee at around 90.33 per dollar, will also work in exporters’ favour. The rupee’s weakness against the dollar raises rupee realisations on export invoices and allows exporters to price more competitively without squeezing margins. 

For large-volume apparel orders, even small exchange-rate movements can materially change landed costs for buyers.

A narrow but meaningful window for exporters

What distinguishes the current phase is the alignment of multiple factors. India is gaining trade access in key markets just as Bangladesh faces disruption and Vietnam’s cost pressures rise. At home, policy support and currency trends are moving in the same direction. Together, they create a window for Indian textile and apparel exporters to increase their global footprint. 

"And there will be technological intervention and India will get superior technology from the United States, by which we think that we can make our manufacturing sector more competitive," Mehta said. 

Whether India can convert this into lasting gains will depend on execution, scale and reliability, but for now, the conditions are unusually favourable.