Why in the News?
On May 6, India and the UK signed an important Free Trade Agreement (FTA), which was called a historic achievement by Prime Minister Narendra Modi. The FTA creates new opportunities for the textile sector, which now needs to match global styles and standards
What are the key benefits of the India-UK Free Trade Agreement (FTA)?
| Benefit | Description | Eg |
| 1. Enhanced Market Access | India gains zero-duty access to UK markets for industrial and agricultural goods; UK exporters get reduced tariffs in India. | Indian processed foods earlier faced 10–12% tariffs — now duty-free in the UK. Tariffs on British whiskey reduced from 150% to 40% over 10 years. |
| 2. Boost to Key Domestic Sectors | Labour-intensive Indian sectors like textiles, apparel, toys, and footwear benefit; UK gains in automobiles and spirits. | Indian apparel now gets zero-tariff access to UK.
Tariffs on British cars slashed from 100% to 10%. |
| 3. Job Creation & Economic Growth | Trade expansion leads to employment generation and investment in both countries. | India’s textile sector, employing 45+ million people, can boost jobs through increased exports. |
| 4. Diversification of Trade Partners | India reduces dependency on US/EU; UK diversifies beyond EU post-Brexit. | India currently holds just 1.8% share in UK imports — FTA targets major increase. |
| 5. Foundation for Future FTAs | Sets a model for India’s trade negotiations with other major economies like the EU and US. | Learnings from tariff cuts and ESG compliance can aid future deals with EU/US. |
How can India improve its Textiles and Apparel sector to capitalize on the FTA with the UK?
- Strengthen the Value Chain and Infrastructure: India must address its fragmented and geographically dispersed T&A value chain. Fast-tracking the operationalization of PM MITRA parks can create integrated textile hubs, reduce logistics costs, and improve delivery timelines. Eg: Bangladesh delivers apparel orders in 50 days compared to India’s 63 days — a more integrated value chain can help India match or exceed this efficiency.
- Promote Manmade Fibre (MMF) Production: India needs to resolve the inverted GST structure and ease quality norms to boost MMF-based products, which dominate global demand for technical textiles, athleisure, and activewear. Eg: MMF garments are taxed higher at the input stage than at the finished product level, making Indian exports less competitive globally.
- Focus on Compliance, Design, and Market Relevance: Indian exporters must align with global fashion trends and strengthen ESG (Environmental, Social, Governance) compliance, especially in anticipation of EU and UK sustainability regulations. Eg: The EU’s Corporate Sustainability Due Diligence Directive (CSDDD) will require traceable, ethical supply chains by 2029 — Indian exporters must prepare accordingly.
Why is the operationalisation of PM MITRA parks important for India’s textile industry?
- Integrated Value Chain and Reduced Costs: PM MITRA parks aim to bring together the entire textile value chain — from spinning, weaving, processing to garmenting — in one location, reducing logistics costs, delays, and inefficiencies. Eg: Currently, cotton is grown in Gujarat, yarn spun in Tamil Nadu, and garments stitched elsewhere, leading to high costs and long lead times. An integrated park would streamline this process.
- Boost Export Competitiveness: These parks can help scale up production, attract investment, and improve quality standards for global markets like the UK, where India now enjoys zero-duty access under the FTA. Eg: By focusing PM MITRA parks in export-oriented regions like Navsari (Gujarat) and Virudhunagar (Tamil Nadu), India can cater more efficiently to UK and EU demand.
Where does India lag behind in terms of manmade fibre (MMF) production compared to global competitors?
- Inverted GST Duty Structure: The GST on raw materials (like MMF yarn at 12%) is higher than on finished products (5%), leading to increased production costs and reduced global competitiveness. Eg: Indian MMF garments are costlier compared to those from Vietnam or Bangladesh, where tax structures are more balanced.
- Restrictive Quality Norms and Compliance Issues: Outdated or complex quality standards limit innovation and access to high-performance MMF products demanded in global markets. Eg: Indian firms struggle to meet the quality requirements for technical textiles used in athleisure and activewear segments.
- Lack of Investment in High-End Functional Fabrics: India has limited capacity for producing value-added MMF fabrics such as moisture-wicking, stretchable or anti-bacterial textiles, unlike China or South Korea. Eg: While China leads in exporting performance-based textiles, India still focuses on basic polyester products.
Way forward:
- Reform Tax Structure & Boost Incentives: Rationalize the GST structure to eliminate the inverted duty issue and offer production-linked incentives (PLI) for MMF textiles to enhance global competitiveness.
- Invest in R&D and Modern Manufacturing: Encourage investment in high-performance MMF fabric production, innovation, and compliance infrastructure to meet international standards in technical textiles and sustainability.
Mains PYQ:
[UPSC 2017] Account for the failure of the manufacturing sector in achieving the goal of labor-intensive exports. Suggest measures for more labor-intensive rather than capital – intensive exports.
Linkage: Textiles and Apparel (T&A) sector as a labour-intensive sector that employs over 45 million people and can benefit significantly from the FTA by gaining access to high-end markets. This question directly asks about promoting labour-intensive exports, aligning perfectly with the potential benefits highlighted for the T&A sector through the FTA.
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