Readymade garment industry growth to halve to 3-5 pc in FY26 on US tariff headwinds: Report

Mumbai, Aug 26 (PTI) India's readymade garment industry's revenue growth is expected to almost halve to 3-5 per cent this financial year, as the US imposes 50 per cent tariffs on its imports from India, which will become effective from August 27, 2025, a report said on Tuesday.

Readymade garment (RMG) exports totalled USD 16 billion last fiscal, which accounted for 27 per cent of the sector's total revenue, Crisil Ratings said in a report.

A third of the exports were to the US, and the 50 per cent tariff puts India at a disadvantage compared with competing nations like China, Bangladesh and Vietnam, it added.

"If the tariffs hold, RMG exports to the US will see a sharp decline. In the first quarter of this fiscal year, total exports from India rose 10 per cent year-on-year to USD 4 billion, with exports to the US recording a 14 per cent growth during the same period. The trend is expected to sustain through August 26, till the enhanced tariffs kick in," Crisil Ratings Deputy Chief Rating Officer Manish Gupta said.

Post 50 per cent tariffs, Indian exports to the US may be minimal, despite limited capacity of competing nations in value-added garments and lead time taken by big-box retailers in the US to re-align their sourcing arrangements, he said.

"Overall, we expect the share of the US in India's RMG exports to fall from 33 per cent last fiscal to 20-25 per cent this fiscal," he added.

The report stated that the RMG players now will have to realign trade with other major export destinations -- the European Union (EU), United Kingdom (UK) and United Arab Emirates (UAE), which together form 45 per cent of India's exports for fiscal 2025.

The recently signed Free Trade Agreement (FTA) with the UK is also likely to result in higher exports to that country from the end of this fiscal, providing some relief to the industry, it added.

"The domestic market for RMG, accounting for three-fourths of the sector's revenue, will continue to see steady revenue growth of 8-10 per cent this fiscal, fuelled by economic growth, interest rate cuts, and tax reductions.

This, in turn, will cushion the tariff blow and spur overall growth at the sector level, but at a slower pace than last fiscal," Crisil Ratings Director Gautam Shahi said. PTI SM MR