New Delhi’s textile export sector has received a significant lift following the recent India-US trade agreement. The US decision to slash import tariffs on Indian goods from 25% to 18% has prompted rating agency ICRA to upgrade the industry’s outlook from ‘negative’ to ‘stable’.
This positive shift comes at a critical time for India’s apparel and fabric exporters, who have been grappling with global trade uncertainties. According to ICRA’s latest report, textile exports are projected to dip by 3-5% in FY 2025-26 but rebound strongly with 8-11% growth in FY 2026-27.
The tariff reduction is a direct outcome of bilateral trade negotiations, easing pressures on profit margins that had shrunk to around 7.7% this fiscal year. Analysts anticipate margins recovering to 9.5% by FY 2027, driven by improved cost competitiveness.
In FY 2024-25, India’s textile exports totaled $16 billion, with the US accounting for nearly a third of this volume. Last year’s tariff hikes had forced exporters to offer discounts to American buyers, eroding margins by about 2 percentage points.
ICRA highlights that upcoming deals like the India-Europe free trade agreement will further bolster manufacturing exports. Labor-intensive sectors such as textiles, polished diamonds, seafood, and footwear stand to gain the most from these developments.
Experts urge diversification strategies to mitigate risks from over-reliance on single markets. As global trade stabilizes, Indian textile firms are poised for a robust recovery, signaling brighter prospects ahead.