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The festive demand from the US for the Indian textile sector has worsened because of the 50 per cent US tariffs along with weak demand, making it harder to even raise prices, noted a report by Systematic Research. The report stated that if the 50 per cent tariff remains, retailers may need to renegotiate prices with suppliers, and Indian manufacturers will likely have to absorb a significant portion of the cost increase.
"The US remains a key export market, accounting for 8-10 per cent of India's RMG revenues, but recent tariff hikes are expected to limit growth in FY26. Export orders may be pressured as retailers negotiate sharper price points, compressing realisations for Indian suppliers," the report added. The report added that Indian exporters are already facing stiff competition from neighbouring countries, such as Bangladesh, which continue to enjoy lower tariff rates, putting India at a disadvantage in the US market.The situation could worsen due to weak demand in US, making it even harder for Indian manufacturers to raise prices. Uncertainty is also growing due to inventory levels at major US retailers like Walmart and Target, although some improvement was seen in July. The upcoming festive season restocking in October will be important to watch.The report added that even though other countries may not be able to replace Indian suppliers right away due to limited capacity, Indian exporters will still face pressure in the short term, as US retailers are likely to be cautious with their festive season orders.The report highlighted that India's advantages in value-added categories such as fashion apparel, embellished products, and complex stitching styles provide insulation, as competitors like Bangladesh and Vietnam have limited capacity in these segments."India's integrated supply chain and ability to provide just-in-time deliveries also remain attractive for local brands, ensuring continuity of relationships even in weaker demand conditions," the report added. However, the outlook for the RMG (Readymade Garments) industry remains resilient despite steep US tariffs, because of domestic demand, the report added. Emphasising the significance of internal demand, the report said, the domestic market, contributing 70-75 per cent of revenues, provides a strong buffer against external shocks. "Rising discretionary consumption, supported by sustained economic growth, softening inflation, accommodative monetary policy, and GST cuts on low-ticket garments, is driving robust demand. Early FY26 trends in apparel sales and production indicate a healthy consumption environment," the report added. The report stated that RMG margins are expected to face modest pressure despite the tariff shock. Exporters would be required to absorb part of the cost, as US retailers are unwilling to shoulder the majority, leading to a sharing of the burden across the value chain, the report further added. (ANI)
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