New Delhi– As the Indian textile and apparel industry braces for the impact of steep U.S. tariffs, analysts say the sector has several mitigating factors — including its strong presence in cotton-based value chains, depreciation of the rupee, and expected gains from new Free Trade Agreements (FTAs) with the EU, the UK, and the Middle East.
A report by CareEdge Ratings on Friday said India, the second-largest supplier of home textiles to the U.S., could offset some losses as exports of cotton yarn and fabric are expected to rise. Competing nations lack backward integration in these products, offering India a relative advantage.
The government has already removed the 10 per cent import duty on cotton until December 31, 2025. Additional support is expected through incentives, interest subsidies, and a dedicated outreach program targeting 40 nations to diversify export markets.
The size of India’s textile and apparel industry is estimated at $160–170 billion, with domestic demand accounting for about 78–80 per cent. In 2024, textile and apparel exports stood at $35 billion, of which ready-made garments (RMG) and home textiles contributed around 63 per cent. The U.S. remained the single largest destination, with shipments worth $10.5 billion — about 28–29 per cent of the total.
“Following tariff hikes by the U.S. from 25 per cent to 50 per cent on Indian goods, textile exporters face a significant cost disadvantage in the American market compared to peers. This may shift some orders to competing countries with relatively lower tariffs,” the report noted.
CareEdge projected that India’s textile exports could decline by 9–10 per cent to around $30 billion in 2026 due to the tariff increase, though 2025 exports are expected to remain stable as some U.S. buyers advanced shipments before the August 27 hike.
The report highlighted the India-UK FTA as a potential game changer for the RMG and home textiles segment, giving Indian exporters equal footing in a $23 billion UK import market. Negotiations with the EU could provide further relief.
“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 basis points,” said Akshay Morbiya, Assistant Director at CareEdge Ratings.
He added that the extent of the decline will depend on how effectively exporters negotiate pricing with U.S. buyers to retain volumes. (Source: IANS)
