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India's Apparel Sector Outlook Upgraded to Stable After US Tariff Reduction

The Indian apparel sector's outlook has been upgraded from 'Negative' to 'Stable' by ICRA following a US decision to reduce reciprocal tariffs on Indian goods. The ratings agency forecasts apparel export revenues will rebound by 8-11% in FY27, despite an expected decline this fiscal year. Key factors include the tariff reduction and anticipated trade pacts like an India-EU free trade agreement. While offering near-term relief, the report emphasizes that long-term success will require exporters to diversify their markets geographically.

Key Points: India Apparel Sector Outlook Upgraded to Stable on US Trade Deal

  • US tariffs cut to 18% from 25%
  • Apparel exports to rebound 8-11% in FY27
  • Margins to recover to ~9.5% by FY27
  • India-EU FTA expected to provide further support
  • Geographical diversification seen as long-term strategy
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Indian apparel sector's outlook upgraded to 'Stable' after US trade deal: Report

ICRA upgrades India's apparel sector outlook to 'Stable' as US cuts tariffs, forecasting an export rebound in FY27. Key insights and analysis.

"The sharp increase in US tariffs last year had been particularly debilitating for export‑oriented companies - Jitin Makkar, ICRA"

Mumbai, Feb 11

The Indian apparel sector has been upgraded to 'Stable' outlook from 'Negative' after the US reduced reciprocal tariffs on Indian goods to 18 per cent from 25 per cent, a report said on Wednesday.

The report from ratings agency ICRA restored its outlook on the apparel sector, saying apparel export revenues are likely to rebound 8-11 per cent in FY27 even as shipments are still projected to decline 3-5 per cent in FY26.

The report attributed revenue growth to recent trade discussions between India and the US aimed at easing sector‑specific pressures. Operating profit margins are expected to compress to around 7.7 per cent in FY26 before recovering to about 9.5 per cent in FY27, the ratings agency said.

India's apparel exports stood at $16 billion in FY25, with the US accounting for nearly one‑third of shipments.

"The sharp increase in US tariffs last year had been particularly debilitating for export‑oriented companies in sectors such as textiles, cut and polished diamonds, and leather and leather products," said Jitin Makkar, Senior Vice President and Group Head, Corporate Ratings, ICRA Limited.

Apparel exporters saw their margins compress by nearly 200 basis points over the past couple of quarters as they were compelled to extend discounts to US buyers to retain volume share, he added.

On the broader outlook, the report said the lowering of US tariffs, the anticipated India‑EU free trade agreement and other bilateral pacts should support a gradual strengthening of India's manufacturing export growth over the medium term.

The tariff cuts represent a relatively smooth landing for Indian exporters at a time when global trade dynamics remain fluid.

Following this development, the labour-intensive export sectors, including textiles, cut and polished diamonds, seafood, and footwear will see improved landed-cost competitiveness.

While the US tariff reduction offers a meaningful near-term relief to exporters, ICRA expects that over the longer term, geographical diversification will emerge as a key risk mitigation strategy that corporate India will adopt.

- IANS

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Reader Comments

J
James A
As someone who follows global trade, this is a smart move by both governments. Reducing tariffs from 25% to 18% is a significant relief. The projected rebound in FY27 shows confidence in the long-term relationship.
R
Rohit P
Good step, but we need to be cautious. The report itself says margins compressed by 200 basis points because companies had to give discounts. We can't celebrate until the workers and smaller units feel the stability in their incomes.
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Shreya B
Finally some good news for our exporters! The US is a huge market. This, along with the potential India-EU FTA, can really boost 'Make in India'. Hope the government focuses on skill development in this sector too. 🇮🇳
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Aman W
The geographical diversification point is crucial. We put too many eggs in one basket. Need to aggressively explore markets in Africa, Latin America, and other Asian countries to build real resilience.
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Nisha Z
My brother works in a garment factory in Noida. The last year was very tough with order cuts. This 'Stable' outlook should mean more consistent work for lakhs of people like him. Fingers crossed!

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