India’s textile exports to UK under FTA could offset US losses: CareEdge Ratings

The recent imposition of reciprocal tariffs on Indian textile exports to the United States (US) may be mitigated by a surge in shipments to the United Kingdom (UK), driven by the newly concluded India-UK Free Trade Agreement (FTA), according to a report by CareEdge Ratings.

The report highlighted that ongoing FTA negotiations with the European Union could further open new avenues, signaling a strategic realignment of India’s textile trade. The India-UK FTA, in particular, is a game-changer for India’s Readymade Garments (RMG) and home textile sectors, creating a level playing field against key competitors to access the nearly $23 billion UK import market.

“India’s textile exports are expected to decline by 9–10% in CY26. With anticipated revenue losses and partial absorption of tariffs, PBILDT margins for Indian RMG and home-textile exporters are projected to fall by 300–500 basis points,” said Akshay Morbiya, Assistant Director at CareEdge Ratings. He added that the extent of the decline will largely depend on how effectively Indian exporters can negotiate pricing with US buyers to retain volumes.

Support measures from the Government of India could help offset some of these challenges. Cotton import duties have been waived until December 31, 2025, and government initiatives—including expanding export markets to 40 nations, export incentives, and interest subsidies—are expected to enhance the competitiveness and profitability of Indian textile exporters.

The US has historically been the largest market for Indian textiles and apparel, accounting for 28–29% of exports over the four years ending CY24. Indian exports to the US are primarily cotton-based, dominated by home textiles and apparel, which together made up 90% of exports in CY24. Other significant markets include Bangladesh (7%), the UK (6%), the UAE (5%), and Germany (4%). The steep 50% tariffs imposed by the US on Indian goods came into effect on August 27, 2025.

In response, the Commerce Ministry noted on August 28 that the tariffs would have a short-term impact on exports in sectors like textiles, chemicals, and machinery, but the long-term effect on overall trade and GDP is expected to be limited.