US Tariffs Challenge Indian Textile Sector Amid Festive Demand Slump

The US tariffs on Indian textiles have halved, compounded by weak demand, creating pricing challenges. Indian suppliers face renegotiations and competition from countries like Bangladesh with lower tariffs. Despite this, domestic demand remains robust, offering resilience against tariffs, especially in value-added segments like fashion apparel.

The Indian textile sector is grappling with the dual challenges of a 50 per cent US tariff and waning demand, according to a report by Systematic Research. This situation is complicating any efforts to hike prices and has placed Indian manufacturers in a tight spot amid festive season expectations.

The report highlights that the US is a critical market, contributing 8-10 per cent of India's readymade garment (RMG) revenues. However, the recent tariff increases threaten to stifle growth by FY26, compelling retailers to pursue more aggressive price negotiations with suppliers, which could compress Indian suppliers' margins.

Amid this bleak outlook, Indian exporters also face stiff rivalry from neighboring countries like Bangladesh, which benefit from lower tariffs, further disadvantaging India's market position in the US. Yet, the report underscores India's strengths in high-value categories, sustaining domestic demand, accounting for 70-75 per cent of revenues, as a buffer against external adversities.

(With inputs from agencies.)