According to rating agency ICRA, the new US tariffs could lead to a 6-9% adjustment in revenues for Indian readymade garment exporters in FY26. In response, the industry is focusing on diversification and strategic market alignment to sustain momentum, even as ICRA revises its outlook from stable to negative.
Key implications include:
- A moderate impact on operating profit margins, which are expected to change to 10% from FY25 to 7.5% this year
- A shift in operational planning to maintain efficiency despite potential volume changes
- Stronger emphasis on working capital management to safeguard credit strength
Importantly, the effect is likely to vary across different exporters. Those with a broader market footprint are expected to remain more resilient, highlighting the importance of diversified buyer bases.
Market trends and export patterns
Over the past five years, India’s apparel exports in constant currency terms have held steady despite shifts in global demand:
- Subdued demand in key end-markets
- Changing sourcing patterns toward countries like Bangladesh and Vietnam
- Lower uptake in regions such as the UK and the UAE
However, exports to the US, accounting for roughly one-third of India’s apparel shipments, saw a 4.8% growth, driven by volume-led strategies in the American market and established buyer relationships.
Product-specific challenges for Indian readymade garment exporters
While certain products may face rerouting challenges due to manufacturing and lead time differences, exporters are adapting their:
- Manufacturing capabilities
- Lead times for scaling up production
- Price and specification requirements
Many competing countries may be cautious about expanding capacity for the US market, indicating India’s enduring sourcing competitiveness.
The recently matured UK FTA and active diversification efforts are creating a buffer for readymade garment exporters. Exporters are looking for viable strategies to explore other demographics while remaining competitive.
Attribution:
Source: This article is adapted from original reporting by Fibre2Fashion published on 9 September, 2025
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