US tariffs: This is how Indian textile and apparel industry can offset losses

New Delhi: As India’s Indian textile and apparel industry braces for US tariff impact in the coming months, mitigating factors include India’s strong presence in the cotton-based textile value chain, especially in the home textile segment, being the second largest supplier to the US, currency depreciation and expected increase in exports to the EU, the UK, and the Middle East under Free Trade Agreements (FTAs), a report showed on Friday.

Additionally, the export loss of ready-made garments (RMG) and home-textile products is likely to be compensated by growth in exports of cotton yarn and fabric as the competing nations lack backwards integration in these products, according to the report by CareEdge Ratings.

The government has removed 10 per cent import duty on cotton till December 31, 2025. Additionally, expected support from the government in the form of expanding export markets through its dedicated outreach programme to 40 nations, as well as export incentives and interest subsidies, can support the competitiveness and profitability of Indian textile exporters.

Indian textile and apparel industry size stands at $160-170 billion, of which the domestic industry accounts for 78-80 per cent. India’s textile and apparel exports were $35 billion in 2024, with ready-made garments (RMG) and home textiles accounting for the majority share of around 63 per cent.

The US remains the largest export destination for Indian textile and apparel products, accounting for 28-29 per cent of total exports, which stood at around $10.5 billion in 2024.

“Following tariff hikes by the US from 25 per cent to 50 per cent on Indian goods, the Indian textile exporters face a significant cost disadvantage in the US market compared to its peers. This may shift some orders to competing countries with relatively lower tariffs,” the report maintained.

While Indian textile and apparel exports in 2025 are expected to decline marginally, a significant decline in exports to the US is expected in 2026 following a sharp rise in tariff rates, potentially reducing overall textile exports by 9-10 per cent to $30 billion.

Indian textile exports are not expected to decline materially in 2025, as some US buyers advanced their shipments from India ahead of the August 27 tariff hike.

However, in 2026, Indian textile exports to the US could decline significantly. The expected decline in exports is likely to be compensated by increase in exports to UK aided by India-UK FTA, and ongoing FTA negotiations with the EU.

The India-UK FTA is a game changer for India’s RMG and home textile sectors, creating a level-playing field vis-a-vis key competing nations for accessing the nearly USD 23 billion UK import market.

“India’s textile export is expected to decline by 9-10 per cent in CY26. With expected loss of revenue and partial tariff absorption, PBILDT margin of Indian RMG and home-textile exporters is expected to decline by 300-500 bps,” stated Akshay Morbiya, Assistant Director at CareEdge Ratings.

However, the degree of decline will ultimately hinge on how effectively Indian exporters can negotiate pricing with their US customers to retain volumes.

–IANS