The question of whether Europe can replace the United States as India’s largest apparel export market has gained urgency following a 9.5 percent decline in India’s readymade garment (RMG) exports to the US during fiscal 2025-26. This downturn occurred amid uncertainty regarding reciprocal tariffs and ongoing concerns over market concentration. Although Europe has delivered encouraging growth across various major destinations, data from the Directorate General of Commercial Intelligence and Statistics (DGCI&S) suggests that replacing the US will require far more than incremental gains in individual markets.

This challenge is particularly relevant as the India-EU Free Trade Agreement (FTA), often described by policymakers as the "mother of all deals," is expected to be implemented by the end of this year. Once effective, the agreement is projected to reshape market access for Indian exporters, especially in labor-intensive sectors such as apparel and textiles. While the US remains India’s largest apparel destination by a significant margin—accounting for US$ 4.83 billion in exports during fiscal 2025-26, which is more than three times the value shipped to the UK and over five times that to Germany—Europe offers a broader and more diverse growth narrative.

Collectively, European markets have shown strong performance. Germany recorded a 9.3 percent increase in imports from India, while Spain grew by 7.5 percent, France by 4.8 percent, Italy by 11.5 percent, and the UK by 4.7 percent. Notably, Italy’s double-digit growth demonstrates a growing acceptance of Indian manufacturing capabilities beyond basic apparel categories, given Italy's status as a global fashion capital. However, Europe’s strength lies in aggregation rather than the scale of any single market, as no individual European country currently approaches the size of the US market.

Beyond Europe, India is diversifying into other regions; Saudi Arabia posted 9.4 percent growth, UAE imports rose 6.4 percent, and Japan recorded an impressive 23.3 percent increase. While these markets serve as important supplementary destinations, their combined scale is currently insufficient to compensate for significant losses in the US. Furthermore, success in Europe will depend not only on price competitiveness but also on compliance capabilities, as buyers are increasingly focused on sustainability, traceability, and forthcoming Digital Product Passport requirements.

In conclusion, Europe is not yet in a position to replace the United States as India’s single most important RMG market. However, it is increasingly capable of reducing India’s dependence on the US. Once the India-EU FTA is implemented, Europe may emerge as the principal driver of the next phase of growth for India’s apparel exports. For now, the core narrative is not Europe replacing the US, but rather Europe becoming large enough to ensure that a downturn in one market no longer dictates the trajectory of India’s entire apparel export sector.