India–EU FTA Sparks Enthusiasm In Tirupur, The Country’s Textile Export Hub

The trade agreement between India and the European Union is being hailed as the mother of all deals. The sharp reduction in tariffs across multiple sectors is expected to significantly improve Indian access to EU markets. At a time when US tariffs have placed severe pressure on Indian exports, expanded access to Europe is expected to provide a major boost. While exporters are jubilant, several domestic industries—where customs duties are set to be slashed—are apprehensive about the impact on local production. These concerns were reflected in the stock market soon after the deal was signed, as shares of several manufacturing companies came under selling pressure.

By the European Union’s own estimates, the agreement could double EU exports to India by 2032, largely by easing or scrapping tariffs on most traded goods. For European companies, this could translate into savings of around four  billion euros in duties.

For India, the gains are expected to unfold gradually over the next seven years, as the EU lowers tariffs on nearly all Indian exports. Several key sectors stand to benefit the most, with duties set to fall to zero on products ranging from marine goods and textiles to leather, chemicals, rubber, base metals, and gems and jewellery—industries that form the backbone of India’s export economy.

The textile sector, which was severely hamstrung by the US tariff hike, has expressed relief following the historic trade deal. The sense of relief is palpable among industrialists and exporters in India’s knitwear capital, Tirupur, and in adjoining regions such as Coimbatore. Since the US imposed punitive tariffs on Indian exporters, manufacturers in Tirupur have been attempting to diversify their markets. However, many exporters who were solely dependent on the US market have suffered heavily during this period.

“Many exporters who were solely dependent on the US suffered badly after the tariff imposition. The Union government introduced a credit guarantee scheme and extended additional credit to help exporters withstand the pressure. Even then, it was tough for those who relied entirely on the US market,” says Thirukkumaran Natarajan of Estee Exporters in Tirupur.

“At present, the EU accounts for about 45 per cent of Tirupur’s textile exports, including the UK, with which India already has a trade agreement. The agreement with the European Union will give a strong push to export growth because it is a huge market. The government must move quickly to operationalise the deal,” he adds.

After the US, the European Union is India’s largest market for textile and apparel exports. However, the imposition of higher tariffs by the US dealt a severe blow to export units, particularly micro, small and medium enterprises (MSMEs). With the EU free trade agreement now in place, the Tirupur Export Association expects exports to grow by around 15 per cent once the pact is operationalised.

Echoing this optimism, the Apparel Export Promotion Council says the agreement will significantly improve market access across all EU member countries. “The EU is the world’s largest apparel importer, with total imports valued at 202.8 billion dollars  in 2024–25. Major garment-importing countries such as Germany, France, Spain and Italy already source substantially from India, and this deal is expected to further boost apparel exports to these markets.”

With the elimination of duty the Indian apparel industry will gain immensely as it will get level playing field vis-à-vis its competing countries like Bangladesh, Turkey and Vietnam” adds Thirukkumaran. According to the Union commerce ministry, with the FTA, the textile sector would see new employment of 6 million to 7 million.

Trade between India and the EU stood at 136.5 billion dollars in the fiscal year ended in March 2025, compared to 132 billion dollars between India and the U.S. and 128 billion between India and China.

The proposed Free Trade Agreement (FTA) is not a one-way street. India, too, will have to significantly open up its markets. According to reports, India will slash tariffs on cars to 10 per cent over five years, down from as high as 110 per cent. This is expected to hugely benefit European carmakers such as Volkswagen, Renault, Mercedes-Benz and BMW.

As per the European Union, India will also reduce tariffs on alcoholic beverages like wine—from 150 per cent to 75 per cent immediately, and further to 20 per cent in a phased manner. The agreement will also lower tariffs on a wide range of EU goods entering India, including machinery, electrical equipment, chemicals, and iron and steel.

These provisions have fuelled scepticism about the agreement. Vijoo Krishnan, CPI(M) politburo member and General Secretary of the All India Kisan Sabha, told Outlook that Prime Minister Narendra Modi himself had refused to sign the Regional Comprehensive Economic Partnership (RCEP) agreement in 2019. “The reasons he cited then for not signing the deal remain valid even now,”  Vijoo Krishnan said.

RCEP is a massive trade bloc accounting for around 40 per cent of global trade and 35 per cent of global GDP, involving 16 countries. The Prime Minister had declined to join the pact, arguing that it failed to adequately address India’s outstanding concerns.

 Vijoo Krishnan warned that sharp reductions in import duties would severely and adversely impact key domestic sectors such as automobiles, pharmaceuticals and machinery. He pointed out that the EU projects its exports to India will grow by 107.6 per cent over the next few years. “This is bound to have detrimental effects on employment,” he said.  According to him, reduced prices of cars and foreign liquor will benefit only the affluent segment of society.  “ Before Free Trade Agreements are signed, the terms and conditions should be discussed in parliament and state assemblies, because every state has a stake in it”, he adds

While the export sector is exuberant over the FTA with the European Union, the automobile and other manufacturing sectors are apprehensive, a sentiment reflected in the fall in stock values of major auto companies.

The FTA will have to be approved by individual European Union member states before it becomes operational. The cumulative impact of the agreement on the Indian economy can be fully assessed only after it is implemented.

In that sense, the India–EU FTA sits at a crossroads of opportunity and risk. While it promises expanded market access and export growth, it also raises serious concerns about the future of domestic manufacturing, employment, and policy autonomy. The true test of the agreement will lie not in headline trade projections but in how effectively the Indian state cushions vulnerable sectors while ensuring that gains are broad-based and sustainable. Only then will it be clear whether the FTA marks a strategic economic leap—or a costly trade-off