The Indian textile sector is facing significant challenges due to high U.S. tariffs and weak demand, impacting festive season orders and pricing strategies.
New Delhi, September 16 (ANI) — The Indian textile industry is grappling with declining festive demand from the United States, exacerbated by a steep 50 percent tariff on imports. A recent report by Systematic Research highlights the difficulties faced by exporters in raising prices amidst this challenging landscape.
The report indicates that if the 50 percent tariff remains in place, U.S. retailers may be compelled to renegotiate pricing with their suppliers. Consequently, Indian manufacturers are likely to absorb a considerable portion of the increased costs, further straining their profit margins.
The U.S. market is crucial for Indian textile exports, accounting for approximately 8-10 percent of the country’s ready-made garment (RMG) revenues. However, the recent tariff hikes are anticipated to hinder growth in the fiscal year 2026. Export orders are under pressure as retailers seek sharper price points, which could compress realizations for Indian suppliers.
Indian exporters are also contending with stiff competition from neighboring countries like Bangladesh, which benefit from lower tariff rates. This competitive disadvantage could further impact India’s market share in the U.S.
The situation is compounded by weak demand in the U.S., making it increasingly difficult for Indian manufacturers to implement price increases. There is growing uncertainty regarding inventory levels at major U.S. retailers, such as Walmart and Target, although some improvement was noted in July. The upcoming festive season, particularly the restocking efforts in October, will be critical to monitor.
Despite the challenges, the report suggests that while other countries may not be able to immediately replace Indian suppliers due to limited capacity, Indian exporters will still face short-term pressures. U.S. retailers are expected to exercise caution in placing festive season orders.
However, India maintains certain advantages in value-added categories such as fashion apparel, embellished products, and complex stitching styles. Competitors like Bangladesh and Vietnam have limited capacity in these segments, providing some insulation for Indian exporters.
India’s integrated supply chain and ability to offer just-in-time deliveries continue to be attractive features for local brands, ensuring continuity in relationships even during periods of weaker demand. Nevertheless, the outlook for the RMG industry remains resilient despite the steep U.S. tariffs, largely due to strong domestic demand.
The report emphasizes the importance of internal demand, noting that the domestic market contributes 70-75 percent of revenues, serving as a robust 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 healthy demand.
Early trends in apparel sales and production for fiscal year 2026 indicate a favorable consumption environment, despite modest pressure on RMG margins due to the tariff shock. Exporters may need to absorb some of the costs, as U.S. retailers are reluctant to bear the majority of the burden, leading to a shared impact across the value chain.
As the festive season approaches, the Indian textile sector will need to navigate these challenges carefully to maintain its position in the global market.
Source: Original article