Dear Readers,
The continuing uncertainty surrounding the US tariff issue continues to be a huge cause of concern for India’s textile and apparel sector as we head into 2026.
While we had hoped that some rollback of the 50% tariff would take place due to the ongoing discussions between the US and India, those expectations have not been met.
The impact of the 50% US tariff has already been seen in India’s export data for October 2025. The sharp drop in Indian textile and apparel exports in October 2025 is largely attributable to the high US tariff. Textile exports in October 2025 fell 12.92% compared to October 2024. Apparel exports declined 12.88% during the same period.
I shudder to think about the fate of India’s textile and apparel exporters if this 50% US tariff continues for much longer.
So far, India’s textile and apparel exporters have been doing all they can to ensure that their US customers don’t look elsewhere by sharing a significant portion of the tariff burden. However, this arrangement cannot go on for too long.
Accounting for almost 28% of India’s textile and apparel exports, the US is the single-largest market for our textile and apparel products, and its importance can never be undermined. To add context to this, I would like to highlight that India’s textile and apparel exports to the US were valued at nearly $11 billion in the financial year 2024-25.
A fair, balanced, and equitable trade deal between India and the US offers the best solution to the tariff issue. A trade deal being signed soon is something we are clearly looking forward to.
On the domestic front, the spate of reforms announced recently brings some cheer among the prevalent despondency around the US tariff challenge and the fall in the IIP numbers in the “manufacture of textiles” and “manufacturing of wearing apparel categories” in October 2025, compared to October 2024.
Combined, these measures spanning GST, Production Linked Incentive (PLI) Scheme, Export Package, revocation of multiple Quality Control Orders (QCOs), RBI’s trade relief measures, and the Labour Codes have the potential to contribute significantly to raising the global competitiveness of India’s textile and apparel sector in the medium to long-term.
The recent repo rate cut by the RBI is also encouraging.
The landmark GST reforms will boost affordability and domestic demand for textile and apparel products. It would also eliminate duty inversion to ease cash flow and working capital for companies, ensure fibre neutrality, make registration and compliance procedures easier for small businesses, encourage more investments, and, also, importantly, promote job creation.
The new PLI Scheme for Textiles will encourage wider participation and hugely benefit smaller players in the textile ecosystem. The expanded coverage of the PLI Scheme 2.0, following the addition of 8 new HSN (Harmonised System of Nomenclature) codes for MMF (Man-made Fibre) Apparel and 9 new HSN codes for MMF Fabrics, will provide tremendous impetus to the MMF segment in India. The move would spur the production of high-value MMF apparel and fabrics in India.
The Export Package, approved by the Union Cabinet on November 12, 2025, will ensure that our textile and apparel sector is better placed to leverage the opportunities opening through the FTAs and diversify into newer markets. CITI looks forward to a swift implementation of this Package.
The rescinding of Quality Control Orders (QCOs) on many key inputs comes as a great relief, as it has been a long-awaited demand of all the user industries.
The RBI’s Trade Relief measures, also announced in November 2025, will aid exporters affected by global headwinds. On this, though, CITI expects the spinning, weaving and processing sectors also to be added in the list of eligible sectors for trade relief.
Even as we await the Rules for the newly notified Labour Codes, CITI is in full alignment with the underlying principle behind the Codes of creating a win-win scenario for both employers and employees. We are hopeful that the Rules will be designed in a way that would adequately protect worker interests and provide companies with the opportunity to undertake better workforce management.
On the RBI rate cut, CITI expects that this move would result in lower borrowing costs and MSMEs in the textile and apparel sector finding it easier to access capital.
With the consultation process for the next Union Budget having started, I would like to take this opportunity to highlight the major expectations of the textile and apparel sector from the FY27 Budget.
The next Budget, coming up with measures that could spur manufacturing, making the availability of raw materials at internationally competitive prices easier, promoting sustainability by enabling MSME units also to make an easier transition to clean energy, and encouraging innovation, is something that we would dearly look forward to from the textile and apparel sector.
The permanent removal of import duty on cotton will be a major help towards increasing the global competitiveness of the Indian textile and apparel sector.
