Editorial 2 : Stitching a New Story
Context: India-UK FTA and India’s textile sector
Overview of the India-UK FTA
- Key Provisions
- Zero-duty access for Indian industrial goods.
- Tariff elimination on 99.3% of animal products, 99.8% of vegetable/oil products, and 99.7% of processed foods.
- Reduced tariffs on British imports
- Whiskey and gin: Tariffs cut from 150% to 75% (phased reduction to 40% over 10 years).
- British cars: Tariffs reduced from 100% to 10%.
- Ambitious Target: Aim to increase bilateral trade from $23.3 billion to $120 billion by 2030
Current Trade Dynamics
- UK’s Global Trade Profile (2024)
- Imports: $815.5 billion
- Exports: $512.9 billion
- India-UK Trade Composition
- Indian exports to UK: Machinery, mineral fuels, pharmaceuticals, apparel, and footwear.
- UK exports to India: Pearls, nuclear reactors, spirits, and vehicles.
Opportunities for India’s Textile & Apparel (T&A) Sector
- Market Potential
- UK’s Apparel Imports: $26.9B (2024)
- UK’s apparel imports are dominated by China (25%), Bangladesh (20%) and India (6%).
- Post-FTA Advantage: Zero tariffs on Indian apparel vs. competitors’ 11–12% tariffs.
- Employment Impact
- T&A sector employs 45 million people in India.
- Access to high-end UK markets could boost labour-intensive sectors like footwear, toys, and apparel.
Structural Challenges in India’s T&A Sector
- Fragmented Manufacturing Base: MSMEs operate in silos across states, limiting economies of scale.
- Disjointed Value Chain: Geographical dispersion increases logistics costs and delays (63-day delivery time in India vs. 50 days in Bangladesh).
- Policy Issues with Manmade Fibers (MMF)
- Inverted GST structure: Higher taxes on inputs (fibres) than finished goods.
- Restrictive quality norms hinder global competitiveness.
Way Forward: Recommendations
- Policy Interventions
- Operationalize PM MITRA Parks: Focus on export-oriented hubs in Navsari (Gujarat) and Virudhunagar (Tamil Nadu).
- Simplify Compliance: Eliminate bureaucratic hurdles for exporters.
- Rationalize GST for MMF: Align tax structure to reduce input costs.
- Expand Trade Negotiations: Prioritize EU and US for zero-duty access.
- Industry Practices
- Global Aesthetics & Compliance
- Adopt ESG standards to comply with EU’s Corporate Sustainability Due Diligence Directive (CSDDD) by 2029.
- Embed traceability and green audits in supply chains.
- Logistics Efficiency: Reduce delivery timelines to match competitors like Bangladesh.
- Product Innovation: Shift to High-Value Products
- Focus on activewear, athleisure, and technical textiles dominated by MMF.
- Invest in functional fabrics and integrate with global retail supply chains.
Conclusion: The India-UK FTA presents a transformative opportunity for India’s T&A sector. Realising the full potential hinges on integrated hubs to consolidate fragmented value chains, modern manufacturing practices aligned with global standards and proactive policy reforms to address structural inefficiencies.