The just concluded Free Trade Agreement (FTA) between India and the UK, a culmination of over three years of negotiations, will significantly impact India's fashion and apparel market. While it aims to boost trade and strengthen strategic partnership between the two, its implications for domestic consumption patterns, the entry of UK brands, and the flow of apparel imports into India warrants a closer examination.

FTA overview

The India-UK FTA is a comprehensive trade agreement designed to foster closer economic ties. Key provisions include

• Tariff reductions: The UK will eliminate tariffs on Indian textile and apparel imports. India, in turn, will reduce tariffs on several UK exports.

• Social security and visa provisions: The FTA also includes agreements on social security contributions for Indian workers in the UK and streamlined visa processes for business travel.

• Economic impact: The UK government estimates a substantial boost to its economy. For India, the FTA is expected to enhance trade, attract investment, and create jobs.

Impact on Indian fashion and apparel market

As per UK Department for Business & Trade, 2024 statistics, pre-FTA, UK tariffs on Indian apparel was 4 to 12 per cent; post-FTA it will be 0 per cent on 99 per cent of Indian exports. It will impact Indian garments which will be 8-10 per cent cheaper, boosting demand for cotton merchandise and home textiles. As of 2024 India holds 5.6 per cent share of UK’s apparel imports, which is £3.2 billion and by 2030 the target is to have 12 per cent share or £4.35 billion. The FTA's influence on the Indian fashion and apparel market can be viewed from several angles.

Increased competition and consumer choice: It is likely to encourage more UK fashion brands to enter the Indian market. This could lead to greater choice for Indian consumers, with access to a wider variety of styles, trends, and price points.

Imports of fashion & apparel: Reduced tariffs could make UK apparel imports more competitive in India. This may lead to a rise in import of UK fashion products, potentially affecting domestic apparel manufacturers.

Opportunities for Indian retailers and brands: While increased competition is a factor, the FTA also presents opportunities for Indian retailers and brands. They can leverage the agreement to source high-quality UK fabrics and accessories at more competitive prices; collaborate with UK designers and brands to bring innovative products to the Indian market; expand their own export operations to the UK, taking advantage of the reduced tariffs.

Shift in consumer preferences: Exposure to UK fashion trends and brands could influence consumer preferences in India. This will lead to greater demand for western wear and contemporary styles and high-quality branded apparels. Also, sustainable and ethically produced fashion will increase.

Table: India and UK bilateral trade in textiles, apparel, and fashion

Note: Data is sourced from the Department for Business and Trade, United Kingdom and Trading Economics.

In the above table, apparel and textile category includes articles of apparel, not knit or crocheted; articles of apparel, knit or crocheted; Other made up textile articles; special woven or tufted fabric, lace, tapestry.

Textiles and apparel imports into India and FTA’s impact

While India is a major exporter of textiles and apparel, there is also a flow of imports, including those from the UK. Historically, India's imports of textiles and apparel from the UK have been relatively small compared to its exports to the UK. This is due to factors, like India's strong domestic textile industry and cost competitiveness in many segments. However, the UK is known for its high-value, premium fashion, and specialized textiles. India's imports from the UK may include high-end fashion apparel from UK luxury brands; specialized textiles, such as fine fabrics, niche materials, or technical textiles used in specific applications; designer wear and exclusive fashion items.

The FTA's tariff reductions are likely to make UK textile and apparel imports more price-competitive in India. This could lead to a gradual increase in imports, particularly in categories where UK brands have a strong reputation or where UK products offer unique value. Increased imports may affect domestic manufacturers, especially those competing in similar product segments. However, it could also stimulate them to improve quality, design, and innovation to stay competitive. Indian consumers will benefit from a wider range of choices and potentially lower prices on UK fashion brands.

Impact on domestic manufacturers

The FTA presents both challenges and opportunities for Indian apparel manufacturers. While increased competition from UK brands, especially in the premium and luxury segments, could put pressure on domestic players. The FTA can help Indian manufacturers access cheaper raw materials from the UK and integrate into global supply chains. Exports to the UK will also get a boost as UK retailers like M&S, ASOS among others are diversifying away from China.

Thus the India-UK FTA is expected to reshape the Indian fashion and apparel industry. While increased competition from UK brands and imports is a likely outcome, the agreement also offers significant opportunities for Indian manufacturers and retailers to increase their reach, upgrade their capabilities, and integrate into the global fashion market. The ultimate impact will depend on how Indian businesses adapt to the changing landscape and leverage the opportunities presented by the FTA.