UK-India Free Trade Agreement Offers Significant Opportunities for Textile Sector

The UK and India just signed a central Free Trade Agreement (FTA) that could be a game-changer for their textile and apparel industries. But while the deal brings big promises, many fund managers still play it safe, pointing to deeper industry issues and economic uncertainties that might slow things down.

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Bright Prospects for Textile Trade

On May 6, 2025, UK Prime Minister Keir Starmer and Indian Prime Minister Narendra Modi sealed the deal. The FTA cuts tariffs on 90% of goods, including textiles and clothing. The hope is to pump an extra £25.5 billion into trade and add £4.8 billion to the UK economy by 2040.

This is excellent news for Indian textile exports, which dipped by about 8% in 2023. But there are already signs of a rebound. For instance, exports of Indian women’s cotton trousers and shorts to the UK jumped roughly 30% that year. There's a growing appetite in the UK for Indian fashion.

Sanjay Nigam, who founded the Fashion Entrepreneur Fund, says, “Indian designers have been up against high tariffs for years, while European labels had it easy. This FTA levels the playing field; Indian brands can finally compete on price.”

Why Investors Aren’t All In

Still, not everyone’s sold on immediate gains. Fund managers are wary, however, because even with tariffs gone, India’s textile sector needs some work. Outdated production methods and a narrow focus on cotton products are holding things back.

A Global Trade Research Initiative (GTRI) report points out that while goods like clothing and shoes will benefit, much of India’s trade with the UK already enjoys low tariffs. So the upside might not be as significant as it seems.

Another sticking point is that India mostly makes cotton-based garments, but UK buyers want more artificial fibre (MMF) apparel, like performance wear and activewear. To make the most of this deal, Indian manufacturers must mix it up and expand their product range.

Economic Hiccups and Labour Questions

Then there’s the bigger picture. In April 2025, UK business activity dipped for the first time in nearly a year and a half. The services sector was hit partly because of global trade issues and local economic bumps. That kind of instability makes investors even more cautious.

The FTA isn’t without controversy. One provision lets Indian workers temporarily assigned to the UK skip paying National Insurance. Critics say it could disadvantage British workers and threaten the local job market.

Conclusion

The UK-India FTA opens the door to real growth in the textile world, cutting tariffs and giving both sides better market access. But that’s just the starting line. Both countries, especially India, must invest smartly, modernise their industries, and stay ready for market twists and turns to see those benefits. So while fund managers see potential, they’re wisely considering the risks.