Deepening India-UK apparel trade: Beyond tariff concessions

This paper is authored by Sulakshana Rao, Ayushi Gupta, Riya Jain, Ashok Gulati, ICRIER.

The India-UK Comprehensive Economic and Trade Agreement (CETA) provides a timely tariff cushion for India’s textiles and apparel (T&A) sector at a moment when US, India’s biggest export market has slapped 50% tariffs- hitting T&A as one of the hardest-affected segments. With immediate tariff elimination on key T&A chapters, Indian exporters gain a potential price edge in the UK’s $19.6 billion apparel import market, where India’s share remains at 6 per cent compared to Bangladesh’s 20%. However, India’s experience with the Japan and Korea CEPAs demonstrates that preferential tariffs alone do not guarantee market gains. We argue that without structural reforms, India risks repeating the underutilisation of past FTAs.

Indian PM Narendra Modi and UK PM Keir Starmer (PTI)

Our analysis identifies three binding constraints that must be addressed to convert tariff preferences into export share. First, raw material bottlenecks in man-made fibre caused by high costs and restrictive Quality Control Orders continue to skew India’s export basket toward cotton, even as global demand is dominated by MMF-based apparel. Second, fragmented clusters and sub-scale factories (typically 500-600 workers compared to Bangladesh’s 1,200) affect competitiveness by limiting India’s ability to deliver large-volume, quick-turnaround orders. Third, procedural and regulatory frictions from licensing and customs delays to complex export documentation undermine ease of doing business, extending lead times and raising costs.

This policy brief recommends a sequenced strategic solution. In the short-term, MMF bottlenecks must be eased to enable exporters to pivot toward UK demand. In the medium-term, product alignment with UK demand, cluster integration and technology upgradation are critical to build reliability and speed. Over the longer term, India must embed competitiveness through a resilient T&A ecosystem with scale, capacity and institutional mechanisms, anchored towards PM MITRA parks and buyer facilitation platforms. Leveraging the UK deal not merely as a tariff cushion but as a catalyst for systemic reform will allow India to de-risk from US tariff shocks, avoid repeating Japan/Korea underperformance, and position itself as a reliable sourcing destination in global T&A value chains.

This paper can be accessed here.

This paper is authored by Sulakshana Rao, Ayushi Gupta, Riya Jain, Ashok Gulati, ICRIER.