A stitch in time

Deepak Dwivedi

ON May 6, India and the UK concluded a landmark free trade agreement (FTA), marked as a historic milestone by Prime Minister Narendra Modi. The deal grants India zero-duty access to all industrial goods and eliminates import tariffs on over 99.3 per cent for animal products, 99.8 pc for vegetable/oil products, and 99.7 pc for processed foods. Currently, India is UK’s 12th largest trading partner with a share in goods imports of a meagre 1.8 pc. As of 2024, India-UK trade in goods stands at $23.3 billion. The UK imports $15.3 billion worth of goods from India and exports $8.06 billion worth of goods. It largely exports pearls, nuclear reactors, spirits and vehicles, and imports machinery, mineral fuels, pharmaceuticals, apparel, and footwear, etc. The FTA has set an ambitious target of taking the trade partnership to $120 billion by 2030.

For the FTA promise to translate into real gains, trade must open both ways. India is willing to let British whisky and gin flow more freely, cutting tariffs from 150 pc to 75 pc, and further down to 40 per cent over the next 10 years. Also, British cars can run on Indian roads with a tariff slashed from 100 pc to just 10 per cent. On the other hand, India can gain in labour-intensive sectors like footwear, toys, and textiles and apparel (T&A). The last one (T&A) is of particular interest to India as it employs over 45 million workers, and access to high-end markets can benefit those engaged in this value chain. To make this happen, India needs to stitch many loose ends in its T&A value chain to design high-value apparel products for the UK market.

The UK imports T&A valued at $26.9 billion, of which apparel makes up $19.6 billion. Its apparel imports are primarily from China followed by Bangladesh, with India accounting for a meagre $1.19 billion. So far, the UK imposed average tariffs of 11-12 pc on apparels from major importing countries. With the FTA, India gets preferential treatment with zero-tariff entry which can be a game-changer vis-à-vis its competitors. To take advantage of this, we need to set a few things in order.

India’s T&A sector has structural challenges. It has a fragmented manufacturing base, with MSMEs operating in silos across states. The value chain is disjointed. Cotton is grown in Gujarat and Maharashtra, yarn is spun in Tamil Nadu, fabric is processed in other parts, and garments are stitched across India. This geographical dispersion raises logistics costs and causes delays – a lead time of 63 days from order to delivery, compared to 50 days in Bangladesh. Moreover, India’s policies on man-made fibres lag global preferences, hampered by an inverted goods and services structure and restrictive quality norms.

To address these issues, India must move swiftly on policy, practices, and products to realign the sector with global market demands. The FTA offers a timely blueprint for ongoing trade negotiations with the US and the EU. But deals alone won’t suffice; we must reimagine India’s textile future through integrated hubs, modern manufacturing, compliant supply chains, and demand-driven exports. The opportunity is massive, but so is the urgency. As the saying goes, a stitch in time saves nine. For India’s textile sector, this is that critical stitch.

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