Indian Apparel Exports Hit by US Tariff Hike: ICRA Downgrades Outlook

ICRA has downgraded India's apparel export industry outlook to Negative due to a US tariff hike. The decision could lead to a 6-9% revenue decline in FY2026. Despite some mitigation from a UK trade deal and market diversifications, profit margins are forecast to drop significantly.

In a significant development impacting India's apparel export industry, rating agency ICRA has revised its outlook from Stable to Negative. The change follows an increase in US tariff rates, a move anticipated to significantly affect India's apparel exports and result in reduced revenues for the upcoming fiscal year.

According to ICRA, the higher tariffs could lead to a 6-9% fall in revenue for Indian apparel exporters in FY2026. This is expected despite support from the Free Trade Agreement (FTA) with the UK and efforts to redirect supplies to alternative markets. Additionally, the agency predicts a decline in operating profit margins to around 7.5% in FY2026, down from 10% in the previous fiscal year.

Currently, India accounts for a modest 6% of US apparel imports. However, the recent 50% tariff rate increase, which takes effect on August 27, 2025, poses a significant challenge to Indian exporters' competitiveness. Although preponed shipments temporarily boosted exports, the long-term impact of the tariffs, especially in the second half of FY2026, remains a concern. Exporters may struggle to maintain their market share amidst these challenges, further intensified by potential hesitation from competing countries to invest, given tariff uncertainties.

(With inputs from agencies.)