How the India EU Free Trade Agreement Could Transform Textile, Luxury, Alcohol, Other Industries, and Global Supply Chains

The India-EU Free Trade Agreement represents a pivotal shift in bilateral trade relations, promising to reshape industrial landscapes on both continents. For India, the agreement offers a compelling alternative to the US market, where import duties on textiles currently reached as high as 50%, and now reduced recently to 18% with a new trade deal. The tariff elimination is expected to improve buyer sentiment towards India and catalyse higher orders and investment throughout multiple value chains, whilst simultaneously making European luxury goods, automobiles, wines, spirits, and gourmet products significantly more affordable for Indian consumers.

The timing proves particularly strategic as European brands seek to diversify their supply chains away from China amidst ongoing trade tensions and regulatory pressures. India's established strengths in cotton production, spinning, and weaving, combined with its competitive labour costs and improving infrastructure, position it as a natural beneficiary of this recalibration in global sourcing patterns.

Textile and Apparel Sector Set for Exponential Growth

The textile and apparel industry emerges as the agreement's primary beneficiary, with ready-made garments, which constitute nearly 60% of India's textile exports to the EU, poised for substantial expansion. Zero-duty access is expected to enhance price competitiveness by 8-12%, enabling Indian manufacturers to capture greater market share against competitors from Bangladesh, Vietnam, and Turkey.

Key textile-producing states including Gujarat, Tamil Nadu, Maharashtra, Punjab, and Haryana are anticipated to witness significant capacity expansion. Traditional textile hubs such as Tiruppur, known for cotton knitwear, and Ludhiana, specialising in woollens and hosiery, are expected to see order volumes increase by 20-30% over the next two years. Labour-intensive segments like handlooms, concentrated in states such as West Bengal, Odisha, and Andhra Pradesh, stand to benefit particularly from improved market access, creating employment opportunities for artisans, weavers, and women workers across rural India.

Sanjay Jain,Group CEO of PDS Ltd, expressed confidence in the sector's prospects: "For PDS, our factory Knit Gallery is well placed to see higher order volumes and longer-term sourcing commitments from EU brands. We believe our present level of 33% of total annual revenue of USD 1.5 billion coming from EU region could further meaningfully benefit from India-EU FTA. We welcome this development and, over the long term, are ready to scale up, invest in quality and sustainability, and deliver world-class products to fashion buyers across Europe."

However, the opportunity comes with compliance requirements. The European Union Deforestation Regulation (EUDR), effective December 2026, mandates that exporters certify products as "deforestation-free," presenting material challenges for India's MMCF textile sectors producing rayon and viscose. With India's paper demand growing by nearly one million tonnes annually and the country's increasing reliance on imported wood pulp, textile manufacturers in key hubs must strengthen traceability and adopt FSC certification to maintain EU market access. Nicole Rycroft, Founder and Executive Director of Canopy, noted, "With the right partners around the table, waste textiles and agricultural residues like bagasse and straw can become the building blocks of lower-carbon, circular fibre supply chains, reducing pressure on global forests whilst strengthening industrial resilience in India."

European Imports, Luxury and Lifestyle Products Become Accessible

For Indian consumers, the agreement promises to make premium European products substantially more affordable. High-end fashion, luxury automobiles from Germany and Italy, French wines, Belgian chocolates, Italian olive oils, and European cheeses, currently subject to tariffs ranging from 30-100%, will see significant price reductions. Premium wine bottles priced at Rs. 5,000-8,000 could become 25-40% cheaper, whilst luxury vehicles may see price reductions of 10-15%.

Karan Ahuja, Spokesperson for Le Marche, a D.S. Group entity, welcomed this development, "Le Marche welcomes this landmark agreement as a pivotal step in making iconic European luxury products more accessible to Indian consumers. With a discerning, well-travelled audience that values authenticity and provenance, we see it as a natural evolution of gourmet living, where global favourites are seamlessly integrated into everyday indulgence. The agreement also enriches the retail shelf with a more nuanced assortment, encouraging discovery and experimentation."

The agreement's full impact will unfold over the coming decade, with projections suggesting bilateral trade could reach $250-300 billion by 2035. For India's $200 billion-plus textile and paper ecosystem, success hinges on balancing enhanced market access with evolving environmental standards, supply chain resilience, and quality benchmarks that European buyers increasingly demand.