A landmark tariff cut by the United States has transformed the fortunes of India’s vital textile industry. Dropping duties from 25% to 18% on Indian imports, the move has led ICRA to revise the sector’s outlook upward from negative to stable, as detailed in their Wednesday report.
This relief package arrives amid volatile international markets, offering exporters a much-needed breather. While FY 2025-26 may see a modest 3-5% export decline, the forecast brightens significantly for FY 2026-27 with expected growth of 8-11%.
Profitability took a hit recently, projected at 7.7% for FY 2026, but a rebound to 9.5% is on the cards by FY 2027. The US remains a cornerstone market, absorbing about one-third of India’s $16 billion textile exports in the last fiscal year.
Senior executives note that prior US tariff increases battered export-driven industries like apparel, diamonds, and leather. Exporters resorted to price concessions, squeezing margins by roughly 2% over recent months.
Looking forward, tariff relief combined with prospective India-EU pacts promises to strengthen India’s manufacturing edge. Sectors reliant on labor, including cut-and-polished diamonds and footwear, will benefit immensely.
ICRA advises long-term risk mitigation through market diversification across geographies. With these tailwinds, the Indian textile sector is set to navigate global headwinds and emerge stronger.