The lower US tariffs of 18% on textiles, as per the interim India –US trade agreement, will give Indian exporters a clear edge over rivals, particularly China, in the world’s largest consumption market. Textiles exporters expect a revival in fresh orders from the US and a bigger share of the $113-billion market.
The tariff cut is expected to benefit exporters of ready-made garments, carpets, handmade products and cotton textiles.
Reclaiming the Global Market
India now enjoys a tariff advantage over key competitors such as China (35%), Vietnam (20%), Bangladesh (20%) and Indonesia (19%). Silk garment exports got a further boost with ‘zero duty’ under the agreement.
Prabhu Dhamodharan, convenor of the Coimbatore-based Indian Texpreneurs Federation (ITF), said textile and apparel exports could see a month-on-month double-digit growth, lifting the monthly apparel export run rate to $1.5–1.6 billion from the current run rate of $1.27 billion.
“Our US buyers are still assessing their order plans. We expect orders that were put on hold or shifted out of India to return,” said Siva Subramaniam, founder and chairman of Tiruppur-based innerwear exporter Raft Garments. The company had been forced buyers to divert orders to Bangladesh, Cambodia and Vietnam following the imposition of higher tariffs.
Bottom-Line Relief
“With the penal tariff gone the discount pressure eases, directly improving profitability from February onwards,” said Pallab Banerjee, MD,of Pearl Global Industries, said.
Banerjee said US retailers and brands had earlier given exporters a choice of either shifting production out of India or absorbing the 25% penal tariff, which accounted for roughly 15% of the selling cost. “That 15% was a substantial amount.
With it no longer applicable from February 7, it should flow straight to the bottom line,” he said. Pearl Global, a contract manufacturer for global brands such as GAP, Zara and Tommy Hilfiger, derives nearly 50% of its India export revenue from the US. Banerjee added that the company has already seen higher buyer engagement from the US since the latest tariff announcement.
“This landmark agreement enhances market access,” said Bimal Mawandia, chairman of the Indian Silk Export Promotion Council. The industry body expects the trade deal to provide a major boost to nearly 20 million people employed across sericulture, including weavers, traders, startups and exporters.
India’s leather and footwear sector is another key beneficiary, with the tariff reduction improving India’s competitiveness against suppliers such as China, Vietnam, Indonesia, Cambodia, the Philippines and Thailand, opening up a $42-billion market. Finished leather, leather footwear and footwear components are expected to see the most gains. Only about 20% of India’s $5.6-billion leather and footwear exports currently go to the US while 60% to the EU. The Council for Leather Exports, however, expects the US deal, along with the recently concluded India–EU FTA, to give a fillip to the sector achieve its $14-billion export target well before 2030.