India’s textile and apparel exports (approx. USD 34-35 billion annually) have gained preferential market access through multiple FTAs with key regions-UAE, Australia, EFTA (Europe), and ASEAN-linked markets. The next frontier is clear: move from signing FTAs to monetising them-turning tariff advantages into orders, realisations, and long-term buyer commitments.
Now, with the India-EFTA Trade and Economic Partnership Agreement (TEPA) in force and investment intent aligned with manufacturing expansion, Union Budget 2026 is well-timed to create the “execution rails” that convert FTA access into measurable export growth.
Just as importantly, the industry is watching for momentum on the India-EU FTA: a deal with the potential to meaningfully shift India’s apparel competitiveness in one of the world’s most valuable consumer markets-especially versus Vietnam and Bangladesh, which benefit from stronger trade linkages and smoother export execution.
Why FTA Utilisation Remains Low
• The constraint isn’t demand-it’s readiness and execution. Key friction points include:
• Complex Rules of Origin (RoO) (especially for yarn, fabric, trims)
• Fragmented domestic value chains, limiting RoO compliance at scale
• High costs for testing, certification, traceability, and ESG compliance
• Working capital pressure during buyer onboarding and initial order cycles
• Competing sourcing destinations show what works: tight backward integration + predictable trade facilitation = higher conversion of tariff preference into repeat business.
Policy Imperatives for Union Budget 2026
1) FTA Execution & Trade Facilitation
• Simplify and digitise RoO compliance
• Faster issuance and verification of Certificates of Origin
• Practical sector playbooks for textiles and apparel exporters
2) Value Chain Strengthening
• Incentivise RoO-compliant yarn/fabric/processing capacities
• Targeted support for MMF and value-added textiles (where global demand is rising)
• Reduce reliance on non-FTA inputs that weaken eligibility
3) Compliance & Sustainability Enablement
• Shared infrastructure for testing, traceability, ESG readiness
• Budget support for upgrades aligned with evolving buyer regulations (due diligence, product compliance, sustainability reporting)
4) Export Finance & Liquidity Support
• Easier pre- and post-shipment credit for FTA-linked orders
• Faster settlement of RoDTEP / ROSCTL
• Working capital support for buyer onboarding and scale-up
5) Market Activation & Buyer Engagement
• Focused buyer outreach in FTA partner countries (and EU readiness programs)
• Support for trade fairs, sourcing forums, and B2B platforms
• Cluster-based “speed-to-market” initiatives to improve lead times and conversion
On pre-budget recomendation Dr. Mukesh Kansal, Chairman, CTA Apparels said “Union Budget 2026 is a crucial moment to convert India’s FTAs into real export gains for textiles and apparel. Preferential access alone is not enough-monetisation depends on execution. Low FTA utilisation is largely driven by complex rules of origin, compliance costs, and supply-chain gaps. The Budget should back simplified Rules of origin processes, stronger domestic value-chain linkages, shared compliance infrastructure, and easier export finance. With the right execution support-and stronger momentum towards the India-EU FTA-FTAs can unlock higher exports, better value realisation, and sustained global competitiveness across the textile and apparel value chain.”
