Mumbai, Jan. 27 -- India's free trade agreement (FTA) with the European Union (EU)-set to eliminate duties for labour-intensive sectors such as textiles and apparel-comes as a much-needed relief for Indian garment exporters battered by the US's punishing tariffs imposed last year. The deal offers exporters a rare opportunity to regain lost ground in a key global market even as they remain financially strained.

India and the EU on Tuesday announced conclusion of negotiations over an FTA that would see the EU drop tariffs on 99.5% of items India exports to the region.

The EU is a key market, accounting for a fifth of India's $36.7 billion annual textile and apparel exports, per government estimates. Removal of the current 9-12% tariffs by...