India’s readymade garment (RMG) industry faces a marked slowdown this fiscal year after Washington imposed a 50 percent duty on Indian exports to the US, the world’s largest apparel market.
Industry revenue, which rose 8 percent in FY25 to ₹5 lakh-crore, is expected to increase by only 3–5 percent in FY26, according to ratings agency Crisil. The duty, effective from Wednesday, threatens exporters’ profitability and will hit firms heavily dependent on the US.
Exports are projected to fall from ₹1.4 lakh-crore in FY25 to ₹1.2 lakh-crore in FY26, even as domestic sales climb from ₹3.6 lakh crore to ₹4 lakh-crore. Crisil projects the US share of India’s garment exports to shrink from 33 percent in FY25 to 20–25 percent this year.
Firms such as Arvind Ltd, Pearl Global, and Gokaldas Exports, which derive a substantial part of their revenue from the US, are expected to be most impacted.
While exports are under pressure, the domestic market—which contributes three-quarters of the sector’s revenue—remains steady. Crisil forecasts domestic demand growth of 8–10 percent this year, cushioning some of the export-related blow.
The tariff elevates India’s disadvantage vis-à-vis competitors such as Bangladesh, Vietnam, and China, which enjoy stronger access to the US market. As a mitigation strategy, Indian exporters are diversifying their operations. Gokaldas Exports’ vice-chairman and managing director, Sivaramakrishnan Ganapathi, said the company has expanded into overseas facilities and acquired fabric maker BTPL as part of a backward integration strategy.
Notwithstanding, uncertainty abounds. Rahul Mehta, chief mentor at the Clothing Manufacturers Association of India (CMAI), said exporters are dealing with considerable "uncertainty and confusion” amid sharp order declines. He cautioned that smaller firms could become insolvent and jobs might be at risk.
India’s textile and apparel exports were valued at approximately ₹3 lakh- crore in FY24. Europe and the US together accounted for nearly two-thirds of this total, putting smaller and mid-sized firms—which make up 80 percent of the sector—at greatest risk. Larger companies with overseas production options may shift orders to other hubs.
Crisil estimates that profitability for RMG exporters heavily reliant on the US could shrink by 300–500 basis points. If the tariff reverts to 25 percent, India’s stronger positioning in value-added garments could help mitigate the impact.
(By arrangement with livemint.com)
