India’s apparel trade with Europe is entering a turning point. Its exports to the European Union reached a record $4.66 billion in FY2025–26, up from $4.55 billion a year earlier. The number is still modest compared with the scale of the EU market, but the direction is changing fast.
European market emerges as strategic growth driver for Indian apparel
The European market is becoming strategically important for India because the country is about to remove one of its biggest growth barriers. India and the EU concluded their Free Trade Agreement negotiations in January 2026. According to the Government of India, zero-duty access across textile and clothing tariff lines will eliminate EU duties that currently reach 12% on an import market valued at $263.5 billion.
This matters because India is not entering Europe from a standing start. It already has a large manufacturing base, domestic fiber availability, and an integrated supply chain covering cotton, man-made fibers, and home textiles.
The shift is already visible in corporate strategy. India’s textile exports to Europe increased 9% in FY2025–26, while exports to the US declined 7%. Raymond Lifestyle expects Europe to contribute 20–25% of its exports within two years, up from 17%. According to Reuters, European inquiries have increased, and around 30% have converted into orders.
The impact will be felt directly in sourcing competition. The EU imported about €90 billion of apparel in 2025, with Bangladesh remaining a major supplier. In January–April 2026, Bangladesh’s apparel exports to the EU fell 19.33% to €6.09 billion.
Bangladesh still has duty-free access under the Everything but Arms arrangement during its LDC transition. India will not gain an immediate tariff advantage over Bangladesh. Instead, India will remove the 9–12% tariff gap that made its products less competitive.
However, the long-term dynamic will change when Bangladesh graduates from LDC status and loses automatic EBA access. India will also face the EU’s strict Rules of Origin requirements, which typically demand double transformation from yarn to garment. Integrated Indian mills will qualify easily, but non-integrated garment converters importing foreign fabric will face challenges.
Non-tariff barriers will also test Indian exporters. The EU is implementing the Carbon Border Adjustment Mechanism and strict supply chain compliance rules. Indian manufacturers relying on coal-heavy power grids must address energy sustainability to capture market share.
Tariff removal alone will not decide the winners. The competition will depend on scale, speed, quality, compliance, and supply chain reliability. India’s success will depend on how quickly manufacturers convert tariff savings into competitive pricing and secure long-term European buyer programs.
