Even as the short-term prospects look grim, the situation reinforces the urgency of diversifying markets, driving innovation, and bolstering policy support
The imposition of an additional 25 per cent tariffs on India holds the potential of delivering a crippling blow to the Indian textile and apparel industry. Impacting the country’s textile industry’s export market to the US, which is valued at USD 10 to 12 billion annually, such elevated duties could severely destabilise the Indian apparel industry and leading to factory closures, unemployment and making Indian exports uncompetitive in the global market.
The proposed 50 per cent tariff will increase the cost of Indian apparel by 30 to 35 per cent compared to alternatives from countries like Bangladesh and Vietnam, making Indian exports uncompetitive in the global market. Buyers are unlikely to bear such a substantial pricing gap, which could lead to a sharp decline in export orders, experts noted.
“India’s Apparel exports to the US are approximately USD 5.5 billion. If the 50 per cent tariff is to continue, I doubt if this figure could reach USD 2.00 billion. We are therefore talking of a drop of USD 4.00 billion. The drop will be seen across the entire spectrum, but since knitted garments and casual wear form the bulk of our exports, these categories will be worst affected,” highlighted Rahul Mehta, Chief Mentor, Clothing Manufacturers Association of India (CMAI).
The United States of America accounts for 28 per cent of India’s textiles and apparel (T&A) including handicrafts exports in the financial year 2023-24 (FY24), as per the data from the Ministry of Textiles. The country’s total export of T&A including handicrafts stood at USD 35.8 billion in FY24, while it was USD 24.06 billion in April to November 2024 period.
Hitting The Belly
From the industry’s perspective, the data from the Ministry of Textiles revealed that Ready Made Garments (RMG) has the largest share (41 per cent) in the total exports followed by cotton textiles (33 per cent), man- made textiles (15 per cent) during the period of April-October of FY25. RMG of all textiles exports increased by 10.03 per cent from USD 14.53 Billion in FY24 to USD 15.99 billion in FY25.
“The types that are going to be under the most stress are essentially going to be cotton material, clothing, and domestic textiles are going to be under the most stress. In the short run, this may translate into reduced order volumes, and industry estimates a possible decline of USD 3 to 4 billion in exports every year if the trend continues,” explained Suketu Shah, Chief Executive Officer (CEO) of Vishal Fabrics.
Home textiles and carpets are both significant export-oriented sectors with exports accounting for 70-75 per cent and 65-70 per cent of total sales respectively for these sectors. Of this, US accounts for around 60 per cent of exports for home textiles and around 50 per cent of exports for carpets, Crisil Ratings said in a report.
While there is some tariff advantage currently against China, which is the next largest exporter to the US, the reciprocal tariff will lead to a material decline in revenue and profits for both these sector, especially given the limited ability to pass on the higher cost due to the discretionary nature of products, the report added. It noted that for the RMG segment, exports to the US will become completely unviable as the tariff structure will be significantly higher than that of competing manufacturers in China and Vietnam.
Exploring Viable Alternatives
Experts noted that there are no short-term or immediate solutions or remedies possible. For those who will survive, the long term strategies will include diversifying into non-US markets such as the European market, United Kingdom (UK), Middle East, South America, Australia, Japan, etc. Some may also look at entering the Indian domestic market, they added.
“The industry is seeking lower tariffs for a bilateral agreement with the US, something like what Vietnam achieved. But companies cannot simply count on that. As margins are expected to reduce, large players with around 75 per cent exports to the US, are exploring relocation, diversification, and US acquisitions,” highlighted P Senthilkumar, Partner at Vector Consulting Group.
For the sector, expanding up the value chain, incurring investment in product innovation, and accessing markets with trade agreements can serve to address the challenge, Shah explained.
Government’s Policy Support
While noting that the onus cannot rest solely on the government, experts suggested that at the policy level, strong support from the government in terms of export incentives, accelerated progress on trade agreements, and initiatives for encouraging capacity building can be a game changer.
“While the government may prefer to avoid direct subsidies, some relief for exporters, especially those targeting the US, is essential. A pricing disadvantage of 30 to 35 percent cannot be bridged through non-monetary support alone,” Mehta explained.
Alongside limited subsidies, other measures like lowering interest rates and removing import duties on garment raw materials are critical to making Indian products more competitive, Mehta noted. Experts agreed that at the same time, the industry must diversify its markets by accelerating access to the EU, leveraging FTAs with the UK and Japan.
30 Lakh Jobs At Risk
MK Stalin, the Chief Minister of Tamil Nadu, highlighted that in the last financial year, while 20 per cent of India’s total goods exports of USD 433.6 billion were to the US, 31 per cent of Tamil Nadu’s USD 52.1 billion goods exports went there. Citing the concerns around textile industry, he added that Tamil Nadu accounted for 28 per cent of India’s textile exports in 2024-25.
“Especially, our textile sector employs nearly 75 lakh people and with a 25 per cent tariff and a proposed 50 per cent tariff, an estimated 30 lakh jobs are at immediate risk. To mitigate this crisis, it is essential to address the structural issues that have long hindered our export competitiveness,” the CM wrote in a letter to the Prime Minister Narendra Modi.
The proposed tariff shock is not just a trade challenge but a structural test for India’s textile and apparel industry. While the near-term outlook remains grim, with the risk of billions in lost exports and millions of livelihoods at stake, the crisis also underscores the urgent need for diversification, innovation, and policy support.
