Rating agency projects apparel sector recovery in FY2027 as trade conditions improve
The outlook for India’s apparel export sector has been restored to “stable” by ratings agency ICRA following recent reductions in US tariffs on Indian imports. According to ICRA, the reduction in reciprocal tariff from 25% to 18%, along with the removal of an additional 25% ad valorum duty introduced in 2025, has improved prospects for export-oriented sectors, including apparel.
Apparel Sector Expected to Recover
ICRA noted that apparel exporters experienced margin pressure during the period of higher tariffs, particularly while serving the US market.
“The sharp increase in US tariffs last year has been particularly debilitating for export-oriented companies in sectors such as textiles, leather and leather products. Apparel exports, for instance, saw their margins compressed by nearly 200 basis points over the past couple of quarters as they were comparing to extend discounts to US buyers to retain volume share,” said Jitin Makkar, Senior Vice President & Group Head, Corporate Ratings, ICRA Limited.
The agency expects apparel sector revenues to contract by 3% to 5% in FY2026. However, it projects a recovery of 8% to 11% in FY 2027. These numbers represent an improvement over its earlier outlook issued in September 2025.
Trade Agreements Expected To Support Export Growth
ICRA stated that the recent tariff adjustments provide a more favorable operating environment for exporters while broader trade agreements could support manufacturing exports over the medium term.
“Against this backdrop, the lowering of US tariffs, as a prelude to the formal signing of the US -India trade agreement in due course, as also the anticipated implementation of the India-EU free trade agreements next year, beside other bilateral trade pacts, augur well For a gradual strengthening of India’s manufacturing export growth over the medium term,” Makkar commented.
ICRA added that apparel exporters, like sectors, are expected to continue expanding their presence across multiple markets as part of long-term efforts to manage trade-related risks and support growth.
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