Chennai, Jan 27 (.) Credit rating agency CARE Ratings today said the free trade agreement (FTA) with the European union (EU) unlocks $4-4.5 billion export potential for the Indian ready made garment (RMG) sector.
India today announced the signing of FTA with EU which is termed as `mother of all deals’.
According to CARE Ratings, the RMG sector contributes a significant share of around $525 billion to the global textile and RMG trade.
The European union (EU) is the world’s largest RMG market, with imports of nearly $84 billion (excluding trade among EU countries) in CY24.
India currently exports US$4.5-5 billion of RMG to the EU, holding about 5% share of the EU’s RMG market. Unlike India, key competitors such as Bangladesh, Turkey, Vietnam, Pakistan, and Cambodia enjoy duty-free access.
With the suspension of Generalised Scheme of Preferences (GSP) benefits from January 01, 2026, duties on India’s apparel exports to the EU have increased from 9.6% to 12%, further widening the tariff gap and impacting India’s competitiveness, CARE Ratings said.
“The India–EU FTA is therefore critical to improve competitiveness of Indian RMG exporters. The agreement is called the “Mother of All Trade Deals” because it creates a level playing field for accessing the EU’s RMG market, which is likely to reach US$105 billion shortly (already at about US$94 billion in 11MCY25),” CARE Ratings said.
Upon implementation by 2027, India will gain a 12% duty advantage over China, which currently holds the largest market share of nearly 30% in the EU’s RMG imports.
“India is expected to gradually increase its market share from 5% to 8-9% in the EU’s RMG imports, unlocking an incremental annual export opportunity of nearly US$4-4.5 billion over the medium term,” the credit rating agency said.
“For India’s vast MSME sector, the historic India-EU trade agreement offers a much-needed lifeline — unlocking preferential access to a €15-trillion-plus market with tariffs eliminated or cut on more than 99 % of Indian export value and opening doors for labour-intensive goods ranging from textiles and gems to engineering products,” said K.E.Raghunathan, National Chairman of Association of Indian Entrepreneurs (AIE)
“Yet AIE, representing MSMEs, caution that while lower EU duties can boost volumes, the real test will be managing compliance costs, navigating non-tariff barriers and leveraging the EU opportunity to offset losses suffered in the US,” Raghunathan said.
. VJ SAS .