In a report by CareEdge Ratings, it has been stated that the immediate losses that India incurred owing to reciprocal tariffs on its textile exports by the US, might get balanced through exports to the UK, reinforced by the recent India-UK Free Trade Agreement (FTA). It also avers that the FTA deal with the EU might open new opportunities, redefining the strategic direction of India’s textile trade.
Moreover, the report confirmed that this FTA will create a level-playing field against the major competing countries for accessing the US $ 23 billion UK import market.
Akshay Morbiya, Assistant Director, CareEdge Ratings stated that India’s textile export is expected to decline by 9-10% in CY ’26. With estimated loss of revenue and partial tariff absorption, PBILDT margin of Indian RMG and home-textile exporters is expected to decline by 300-500 bps. But the degree of decline will depend on the effectiveness of Indian exporters to negotiate pricing with their US customers to retain volumes.
However, Krunal Modi, Director of CareEdge Ratings gave a more positive outlook stating, “The Government of India has removed 10% import duty on cotton till 31st December, 2025. Additionally, expected support from the Government in the form of expanding export markets through its dedicated outreach programme to 40 nations as well as export incentives and interest subsidies, can support the competitiveness and profitability of Indian textile exporters.”
Krunal also said that the export loss happening in RMG and home textile products will be further adjusted through growth in exports of cotton yarn and fabric as India’s competitors lack backward integration in these products. The key observation points will now be the benefits from India-UK FTA and prospective trade agreement with the EU.
Accounting for 28-29% of exports over the last four years ended CY ’24, the US has been the largest export market for Indian textiles and apparel by far. Exporting cotton-based textile products to the US, primarily home textiles and apparel, in CY ’24, India’s textile exports to the US stood at 90%, Bangladesh (7%), the UK (6%), the UAE (5%), Germany (4%) amongst others.
As per the Commerce Ministry’s statement on 28th August, in sectors such as textiles, chemicals and machinery, the recent tariffs will have a short-term impact as far as export is concerned but the long-term effects on overall trade and GDP will be limited.
