US tariffs to reduce domestic textile industry revenues by 5-10%: Crisil Ratings
According to a report by Crisil Ratings, the 50 per cent US tariff is likely to result in a 5-10 per cent decline in revenues of domestic textile manufacturers, along with a reduction in operating profitability.
The US has imposed a 50 per cent tariff on imports of Indian goods from August 27, including a 25 per cent penalty on buying Russian crude oil. Although US President Donald Trump and Prime Minister Narendra Modi have assured that trade talks are on, no agreement has been reached yet.
The domestic textile industry saw a 2-3 per cent growth in exports to the US in the first quarter of the current financial year (Q1 FY26). However, before the imposition of higher tariffs, exports had picked up due to advance loading of some orders.
Major share of revenue from exports
Exports contribute to at least three-fourths of the domestic textile industry's revenue. The total market size of the industry is estimated to be ₹81,000 crore in FY25E, up from ₹75,000 crore in FY24. Of this, exports to the US stood at ₹26,000 crore (estimated) in FY25E, up from ₹25,000 crore in the same period last year.
The impact of tariffs on the industry is likely to be more pronounced as exports to the US exceed exports to other countries. Exports to other countries stood at ₹23,000 crore in FY25E, up from ₹20,000 crore in FY24.
. Crisil analysed 40 home textile companies that account for 40-45 per cent of industry revenues.
Maintaining competitive edge
According to the report, these three factors could cushion the blow:
Sales growth during April-August 2025
Diversification into alternative geographies
Limited capacities from competing countries such as China, Pakistan and Turkey
Additionally, a debt-free balance sheet would partially offset the impact on the credit profile, the report said.
Manish Gupta, deputy chief rating officer, Crisil Ratings, said, "With limited capacity to manufacture cotton-based home textile products in competing countries, India should be able to maintain its competitive position in the US market in the near future. This should limit the decline in overall industry revenue to 5-10 per cent in FY26."
UK, EU emerge as alternative markets
Growing trade with the European Union (EU) and the United Kingdom (UK) will help manufacturers offset lower purchases in the US, the report said. These geographies contributed nearly 13 per cent of India's domestic textile exports in FY25.
India recently signed its free trade agreement with the UK and is in the final stages of negotiations with the EU.
Goutam Shahi, director, Crisil Ratings, said, "It will take time to ramp up revenues from alternate export destinations. Meanwhile, operating profitability on exports to the US may decline sharply in the remainder of this fiscal year, as Indian exporters absorb some part of the higher duties and some expected slowdown in demand from the US due to inflation."
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