India's Textile Sector Navigates US Tariffs with Strategic UK Export Boost

The Indian textile sector faces challenges as US tariffs threaten to curb exports. However, an uptick in exports to the UK, fueled by the India-UK free trade agreement (FTA), may provide much-needed relief. According to a report by Care Edge Ratings, the US government's recent imposition of a 50 percent tariff on Indian goods starting August 27 has put pressure on Indian textile exporters.

The report indicated that the potential decline in US-bound exports will be cushioned by increased exports to the UK, aided by the India-UK FTA, as well as ongoing negotiations with the European Union. With higher tariffs, some export orders might shift to competing nations such as Vietnam, Bangladesh, Pakistan, and China.

Despite these challenges, the report suggests that the immediate impact on Indian textile exports might be minimal for CY25, as many US buyers advanced shipments ahead of the tariff hike. A more pronounced decline in exports to the US is anticipated in CY26 when the tariffs' full effects take hold. Indian textile and apparel exports, valued at USD 35 billion in CY24, significantly depend on the US market, contributing about 28-29 percent of total shipments.

The India-UK FTA is anticipated to boost India's ready-made garments (RMG) and home textiles sectors by leveling the playing field against other rivals in the UK's textile import market. Additionally, ongoing FTA talks with the EU are expected to further bolster Indian textile exports in coming years.

The report highlighted that India's textile and apparel industry, with a total market size of approximately USD 160-170 billion, heavily relies on the domestic market for 78-80 percent of its share. With RMG and home textiles making up 63 percent of the USD 35 billion exports in CY24, the US remains the largest export destination at just shy of USD 10.5 billion. Although India faces immediate risks from the US tariff hike, strategic agreements with the UK and EU could help balance these impacts and support long-term growth in the textile sector.

(With inputs from agencies.)