MUMBAI, India — The outlook for India’s apparel export sector has been revised to “Stable” from “Negative” following a reduction in U.S. reciprocal tariffs on Indian goods, according to a new report by ratings agency ICRA.
ICRA said the move to lower tariffs to 18 percent from 25 percent is expected to ease pressure on exporters and support a recovery in revenues. Apparel export revenues are projected to grow between 8 percent and 11 percent in FY27, even as shipments are still expected to decline by 3 percent to 5 percent in FY26.
The agency attributed the improved outlook to recent trade discussions between India and the United States aimed at addressing sector-specific challenges. Operating profit margins for apparel exporters are expected to compress to around 7.7 percent in FY26 before recovering to approximately 9.5 percent in FY27.
India’s apparel exports stood at about $16 billion in FY25, with the U.S. accounting for nearly one-third of total shipments. ICRA said the sharp rise in U.S. tariffs last year had weighed heavily on export-oriented industries, including textiles, cut and polished diamonds, and leather products.
Jitin Makkar, senior vice president and group head of corporate ratings at ICRA Limited, said apparel exporters saw margins shrink by nearly 200 basis points over the past few quarters as they were forced to offer discounts to U.S. buyers to retain market share.
Looking ahead, the report said the easing of U.S. tariffs, along with the anticipated India–EU free trade agreement and other bilateral trade pacts, should help gradually strengthen India’s manufacturing export growth over the medium term. The tariff reduction is seen as providing a relatively smooth adjustment for exporters at a time when global trade conditions remain uncertain.
ICRA added that labor-intensive export sectors such as textiles, diamonds, seafood, and footwear are expected to benefit from improved landed-cost competitiveness. While the U.S. tariff cut offers meaningful near-term relief, the agency said exporters are likely to focus more on geographical diversification over the longer term as a key strategy to mitigate future risks. (Source: IANS)
