What Happened
- India's combined textile and apparel exports fell by 3.75% year-on-year in January 2026, to $3,275.44 million from $3,403.19 million in January 2025.
- Textile exports (fabric, yarn, fibres) declined 3.68% to $1,730.65 million; apparel exports dropped 3.84% to $1,544.79 million.
- The decline was primarily attributed to elevated US tariffs on Indian textile and apparel imports, which remained in effect until early February 2026.
- On February 2, 2026, the US and India announced an interim trade agreement: the US reduced its reciprocal tariff on Indian goods from 25% to 18%, effective February 7, 2026.
- The tariff cut covers textiles, apparel, leather, footwear, plastics, rubber, organic chemicals, and certain machinery — sectors where India is a significant exporter.
Static Topic Bridges
India's Textile and Apparel Sector: Structure and Export Significance
India's textile and apparel (T&A) sector is one of the largest industries in the country — the second-largest employer after agriculture, employing approximately 45 million people directly and another 100 million indirectly across the supply chain. India is the world's second-largest producer of textiles (after China) and a major exporter. The sector is unique in being vertically integrated from raw material (cotton, silk, jute) to finished apparel. However, India faces stiff competition from Bangladesh, Vietnam, and China in global apparel markets, where labour cost and trade preferences play a decisive role in competitiveness.
- India's T&A export target: $100 billion by 2030 (set by Ministry of Textiles)
- T&A's share in India's total exports: ~10-12% (including handicrafts and handlooms)
- Employment: ~45 million direct; ~100 million indirect
- India's global rank: 2nd in textiles production; approximately 5th-6th in apparel exports
- Key sub-sectors: Cotton textiles, man-made fibres (MMF), silk, wool, technical textiles, handloom and handicrafts
- PLI for Textiles: Rs. 10,683 crore scheme (notified 2021) covering man-made fibre and technical textiles — intended to scale up MMF production and reduce dependence on cotton
- National Technical Textiles Mission (NTTM): Launched 2020 — targets technical textiles (medical, geotextiles, agrotextiles)
Connection to this news: The January 2026 export decline reflects the competitive vulnerability of Indian T&A exports to US tariff policy — the 25% tariff disadvantage relative to countries with US FTAs or lower IEEPA tariffs directly hit shipment volumes.
India-US Interim Trade Agreement: Structure and Scope
The India-US interim trade agreement announced on February 2, 2026, marks a significant development in bilateral trade relations. The US imposed tariffs on Indian goods under the International Emergency Economic Powers Act (IEEPA), framing them as part of a broader "reciprocal tariff" framework. India's IEEPA tariff was set at 25% — higher than some competing nations. The interim deal reduced this to 18%, effective February 7, 2026, across a defined set of goods. The deal is a "framework agreement" — a preliminary step toward a comprehensive bilateral trade agreement (BTA) rather than a full-fledged FTA.
- US authority used: International Emergency Economic Powers Act (IEEPA) — presidential emergency trade powers
- India's tariff pre-deal: 25% IEEPA-based tariff on Indian imports to the US
- India's tariff post-deal: 18% IEEPA-based tariff — a reduction of 7 percentage points
- Effective date: February 7, 2026
- Sectors covered: Textiles, apparel, leather, footwear, plastics, rubber, organic chemicals, certain machinery
- Nature of deal: Interim/framework — not a full Free Trade Agreement (FTA); further negotiations expected for comprehensive BTA
- India-US trade (FY25): Bilateral trade of approximately $130 billion; US is India's largest trading partner
Connection to this news: The interim deal's tariff reduction from 25% to 18% directly improves the competitiveness of Indian T&A exports to the US market relative to the tariff-heavy period of January 2026 — the improvement is expected to show in export data from February 2026 onwards.
Trade Agreements: Types and India's FTA Strategy
International trade agreements come in several forms: Free Trade Agreements (FTAs, zero/reduced tariffs on goods), Comprehensive Economic Partnership Agreements (CEPAs, broader coverage including services and investment), Preferential Trade Agreements (PTAs, partial tariff reductions on select items), and interim agreements (framework deals pending a comprehensive agreement). India's trade policy distinguishes between these carefully — full FTAs involve longer negotiations and politically sensitive sectors (agriculture, dairy, pharma). India has active FTAs with ASEAN, Japan, South Korea, UAE (CEPA), Australia (ECTA) and has concluded a CEPA with the UK (in progress as of 2026).
- India-UAE CEPA: Signed February 2022, in force May 2022 — India's first CEPA in over a decade
- India-Australia ECTA (Economic Cooperation and Trade Agreement): Interim in force April 2022; comprehensive FTA under negotiation
- India-UK FTA: Under negotiation; sensitive issues include immigration, dairy, pharma
- India-US: No FTA/CEPA — the interim IEEPA-based deal is not a traditional FTA; it uses US emergency powers framework
- WTO compatibility: IEEPA-based tariff reductions are technically US unilateral measures; the bilateral deal is not a WTO-notified FTA under GATT Article XXIV
- Sensitive list: India's agriculture and dairy sectors are typically kept on a "sensitive list" (excluded from tariff cuts) in all FTA negotiations
Connection to this news: The India-US interim deal is an IEEPA-driven arrangement rather than a formally negotiated FTA — it reflects the US executive's trade authority but is strategically significant as a stepping stone toward a more comprehensive bilateral trade agreement.
Key Facts & Data
- India T&A exports (January 2026): $3,275.44 million (-3.75% YoY)
- Textile exports: $1,730.65 million (-3.68% YoY)
- Apparel exports: $1,544.79 million (-3.84% YoY)
- US IEEPA tariff on India (pre-deal): 25%
- US IEEPA tariff on India (post-deal): 18% (effective February 7, 2026)
- Deal announced: February 2, 2026 (US-India Joint Statement)
- Sectors covered by tariff cut: Textiles, apparel, leather, footwear, plastics, rubber, chemicals, some machinery
- India T&A employment: ~45 million direct, ~100 million indirect
- India T&A export target: $100 billion by 2030 (Ministry of Textiles)
- PLI for Textiles: Rs. 10,683 crore (MMF and technical textiles focus, notified 2021)
- India-US bilateral trade (FY25): ~$130 billion
- US: India's largest single country trading partner