India will make up for US deficit by selling cloth to UK: FTA will give India a chance in Britain’s market of ₹ 2.02 lakh crore

On July 24, India-UK signed a free trade agreement.

The US has imposed a 50% tariff on Indian textile goods, which is in force from 27 August. This can affect India’s textile and textile exports. However, a good news is that due to the Indo-UK Free Trade Agreement (FTA), the increase in exports to Britain can compensate for this loss. This has been revealed in the report of CARARAGE Ratings.

According to the report, FTA’s conversation with the European Union (EU) can also open new avenues for Indian textile trade. The India-UK FTA is especially considered to be a game-changer for readymade garments (RMG) and home textile sector. This will give India equal opportunity to countries like Bangladesh and Vietnam in the import market of about 23 billion dollars in the UK, or 2.02 lakh crore rupees.

How much damage from American tariff?

According to Akshay Morbia, assistant director of CARAIAD Rating, India’s tariff may decrease by 9–10% in 2026 in India’s textile exports. This may lead to a decline of 3% to 5% in the profits of Indian RMG and Home Textile Exporters.

However, it will depend on how well Indian exporters have to have a good conversation with their American customers, so that the amount of export remains intact.

Government support and new possibilities

Carey Ratings Director Krunal Modi said that the Government of India has removed 10% import duty on cotton till 31 December 2025. Apart from this, the government is helping to increase export markets through its special outreach programs in 40 countries, to increase the competition and profit of textile exporters through steps like export incentives and interest subsidy.

Modi also said that the damage in RMG and home textile can be compensated by increase in export of cotton yarn and fabric. Because competitions like Bangladesh have a lack of backward integration (complete production) in these products. The benefits of potential trade agreement with India-UK FTA and EU will be important in this direction.

America is the largest market

In the last four years (2021-2024), the US has been India’s largest textile and textile export market, which is 28–29% of Total Export. India mainly exports cotton-based home textile and clothes to the US, which was 90% of its total textile exports in 2024. Apart from the US, Bangladesh (7%), UK (6%), UAE (5%) and Germany (4%) are other major export markets of India.

Commerce Ministry statement

The Commerce Ministry said on August 28 that American tariffs will have short-term effects on sectors such as textile, chemicals and machinery. At the same time, its effect on India’s total trade and GDP will be limited in the long run.

What is the path ahead?

American tariff is definitely a challenge for India’s textile exporters. But there is every possibility of reducing this loss with new markets like UK and EU as well as government support. Experts believe that if Indian exporters pay attention to prices and quality, they can maintain their strong position in the global market.