UK-India FTA offers Indian textile industry opportunity for up to $1 billion in additional exports: Ind-Ra
New Delhi: India Ratings and Research (Ind-Ra) has stated that the India-UK Free Trade Agreement (UK-India FTA) could offer significant growth opportunities for the Indian textile industry in the medium to long term. According to the agency, the agreement could pave the way for up to $1 billion in additional exports for Indian textile exporters, further strengthening India's competitive position in the global market.
According to the Ind-Ra report, the FTA will enhance the competitiveness of Indian textile products in the UK market and improve market share. However, the actual benefits will depend on how effectively Indian companies implement measures regarding production capacity expansion, cost management, regulatory compliance, and financial discipline.
The agency views the agreement as positive for the credit profiles of Indian textile exporters. However, the benefits will materialize in a phased manner, as boosting exports will require expanding production capacity, gaining buyer acceptance, efficiently managing working capital, and adhering to quality and regulatory standards.
Rohit Sadaka, Director of Corporate Ratings at Ind-Ra, noted that large, integrated textile companies would be better positioned to capitalize on this opportunity due to their strong financial resources, established customer bases, and extensive production networks. Conversely, smaller companies could face increased leverage and liquidity pressures if they incur excessive debt to fund expansion.
The United Kingdom is India's third-largest textile export market, accounting for approximately 6.1% of India's total textile exports. Meanwhile, textile imports into India from the UK represent less than 1% of domestic consumption. Currently, India holds a 6.9% share of the UK's textile import market. Ind-Ra estimates that if this market share rises to approximately 10%, it could generate additional export opportunities worth around $900 million for Indian companies.
According to the report, the elimination of the 12% import tariff will significantly enhance the cost competitiveness of Indian apparel and home textile products. This could enable Indian exporters to gain market share from Chinese suppliers over time. However, competition from Bangladesh—driven by lower production costs and economies of scale—will remain a challenge.
Ind-Ra believes that while the FTA will boost export competitiveness, the scope for an immediate, significant rise in profitability is limited. UK buyers may demand a portion of the tariff benefits in the form of lower prices, while rising costs related to fuel, electricity, freight, and shipping could continue to exert pressure on margins in the near term. Nevertheless, in the long run, increased export volumes, better capacity utilization, and improved operational efficiency are expected to strengthen both the profitability and global competitiveness of the Indian textile industry.
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